A Research On The Issues Of RMB Regionalization

After the Bretton Woods system collapsed, the international money system has taking placed great change. Euro has been introduced in January 1st, 1999, which is derived by the force of European integrative trend. Now, it has been challenged USA dollar as a key international currency. In North American, USA dollar has consolidate the role of international currency, especially by the force of the North American Free Trade Agreement. In East Asia, the USA dollar also has been taken as international currency. The main reasons were that the American market was the main export market and the East Asia countries have been taking the export oriented economical development stratagem. Owing to keep the export stabilization, the East Asia countries have been choice keeping the exchange rate to USA dollar stabilization as a key policy objective. Then, in despite of there are three main area in world economical structure, no three main international currency area were accordingly formed. The East Asia was a de facto dollar area.China is the most important country in East Asia because of its economical and trade magnitude. China has been one of the most important trade parterres among the East Asia countries. It is important to keep the trade stabilization between China and the East Asia countries, in that it is a key factor to keep the East Asia flourish and stability. However, the de facto dollar exchange rate system was the great hidden trouble to keep this area stabilization and continual development. The collapse of exchange rate to pegging dollar was the fuze of Asia financial crisis in 1997. But, after conquered with this crisis, much of countries in the East Asia have been choosed de facto pegging with dollar again. For the sake of defend to the crisis, the monetary cooperation was introduced in East Asia, but its step was tardiness and could not resolve the plight.China is a key trade partner in East Asia. Prompting to use Renminbi (RMB) as quotation currency in trade and taking the RMB regionalization as the main goal in the building of financial system, China could practice the RMB regionalization goal. RMB regionalization is the process of RMB taking as international currency in East Asia. This process is the result of market choice, of which been taken RMB as transactions currency , quotation currency and asset currency in private department, then it also taken as intervention currency, unit-of-account currency and reserve currency in office department. RMB regionalization is the tactic choice of RMB internationalization.This paper will adopt two clues to research the theme. The one is market force and the other one is institution construction on RMB regionalization path. On dealing with market force, we will mainly analyze the cooperation on economy and trade. RMB would be used in economic action as international currency and will be performed one or all of money's responsibility. On dealing with the institution construction, we will analyze the development of foreign exchange market, the openness of capital account and the process on free exchange with RMB and so on. China would be reformed much in order to facility the RMB exchange and investment across the border between China and the East Asia countries. On other hand, China must keep stability on this process. Furthermore, on the RMB regionalization process, it would challenge on the past international currency construction and incur to the competition coming from the existing international currencies. This paper shall use the RMB's competition and cooperation of currency on the process to internationalization to analyze this issue. The main competitors are USA dollar, Euro and Japanese Yen. The tactic on dealing with these international currencies in the RMB regionalization is a key factor to RMB. What is more, China must create a steady economic and financial environment on the process of RMB internationalization.This paper has six parts. The first one is Preface, in which discloses the aim on dealing with this research from the view on theory and realism and shows the foundation of RMB regionalization. In Chapter one, it shall analyze the role of China in East Asia and the relationship between China and other countries in East Asia. The aim to adopt this theme is that the market is the key force to perform currency internationalization. In Chapter two, it shall analyze which one is necessary for China to get over the difficult in recent international currency building. The RMB regionalization is one choice of them. In Chapter three, it shall analyze the financial arrangement to facilitate the RMB regionalization on the basis of institution foundation. In Chapter four, it shall analyze the currency competition of RMB regionalization. It will disclose that RMB would take challenge coming from Dollar, Euro and Yen. In order to evade the competition on Euro and Yen, RMB will keep closed relation with Dollar. In the end, this paper shall focus on the policy coordination and it shall analyze the monetary policy, exchange rate policy and the policy cooperation in East Asia.There are some innovations in this paper, in which shows below:First, this paper shows that the RMB regionalization is the outlet for resolve the puzzle on RMB's exchange rate system. It analyses the evolvement of international currency and the puzzle of RMB in international currency system, then it points out that the RMB regionalization is one of choice to get over this puzzle. It would discuss that the RMB regionalization would be achieved from the reformation of exchange rate institution.Second, this paper points out that China could prompt RMB regionalization from two routes. One is to participate in the East Asia's cooperation, the other one is to take measures actively and achieve the leading role in the process of cooperation of East Asia.Third, it shall analyses the relationship between the RMB regionalization and the freedom of RMB exchange with other currencies. This paper shows that China ought to prompt RMB regionalization on the openness of capital account and perform RMB internationalization gradually. Then, it will perform the combination with the RMB internationalization and the openness of capital account.There are some regrets in this research. First, this paper only analyses small topics about RMB regionalization & internationalization. Then, it may omit some important content for the theme of RMB regionalization. Second, the RMB regionalization is a practicably project. This paper only analyses the structure of RMB regionalization from the use of RMB as medium of exchange and quotation currency in trade. It could not analyze the material operation and practice of RMB in trade process, but they are important foundation to carry out RMB regionalization.