| With three decades of high economic growth, the fact that China has emerged on the horizon in economy is no longer open for debate. By the end of the year 2009, our GDP exceeded USD4900 billion, increasing by 8.7% over last year and ranking the third in the world. Our foreign exchange reserves was USD2400 billion, increasing by 23.3% relative to the last year. About one third of the global foreign exchange reserves is held by our country. In order to maintain the sustained and stable development of our economy, our country should extensively participate in the international currency cooperation, coordinate international currency relationship and create sound international currency environment for the economic development. Firstly, we should place emphasis on the international coordination of monetary policies with developed economies. Secondly, we should also strengthen the currency cooperation with East Asian countries with a foothold in local region. Finally, in addition to the said two levels of international currency cooperation, we should pay more attention to the currency cooperation with Hong Kong, Macau and Taiwan areas. If there are some breakthroughs in the third level of currency cooperation, it will provide useful backing for China's participation in the international coordination of monetary policies on the one hand. And on the other hand, it will facilitate China's functions in the currency cooperation in East Asia.The thesis first sums up the theoretical bases for international currency cooperation so as to find out and analyze the reasons for international currency cooperation, to select the forms of international currency cooperation and to appreciate the effectiveness of international currency cooperation. And then it tracks the evolution of international currency cooperation, dissects the relevant experiences and lessons and provides references for our country. And next it analyzes the needs and obstacles, costs and benefits associated with China's participation in international currency cooperation and raises the envisages of developing a multi-level international currency cooperation for China.The thesis consists of five chapters which constitutes the basic framework for the study. The first chapter is the theoretical bases for international currency cooperation. It sums up the relevant theories for analyzing the needs, forms and effectiveness of international currency cooperation. It aims at providing theoretical bases for further analyses below. The second chapter is a review of the evolution of international currency cooperation. It examines the international currency cooperation in the times of economic recovery after world war two, of economic turbulence in 1970s, and of global financial crisis in 2008. It also appreciates the effectiveness of cooperation under the said circumstances. It aims at absorbing the successful experiences and failure lessons from the evolution of international currency cooperation and providing empirical evidences for the next analyses. The third chapter is the analyses for the needs of and obstacles to China's participation in international coordination of monetary policies, East Asian currency cooperation and currency cooperation with Hong Kong, Macau and Taiwan. The illustration of the said needs and constrains aims at laying a good foundation for the analyses in the next chapter. The fourth chapter is the analyses for costs and benefits of China's participation in international currency cooperation. It reviews the evolution of the cooperation, analyzes the relevant costs and benefits of the said three levels of cooperation. In principle, the relevant benefits outweigh the costs. That is to say, the relevant costs are mostly short-term and one time, while the relevant benefits are long-term and sustainable. The fifth chapter focuses on the objectives and strategies of China's participation in international currency cooperation from the perspective of China. During the process of China's participation in international currency cooperation, China should firstly pay more attention on the enhancement of cooperation with big countries so as to create sound international environment for the smooth currency integration between the mainland and Hong Kong, Macau and Taiwan, East Asian currency cooperation as well as RMB internationalization. Secondly, China should actively participate in the East Asian currency cooperation and try to dominate in it. Thirdly, China should attach importance to the currency cooperation with Hong Kong, Macau and Taiwan, fulfill the currency integration of RMB, HKD, Macau dollar and Taiwan Yuan, and lay solid foundation for RMB internationalization afterwards. Main Conclusions1. It seems that there is no possibility of cooperation of monetary policies between China and USA, but such cooperation will bring win-win situation in the long run. A substantial amount of Chinese foreign exchange reserves are in the form of American treasury bonds. If China sells these American treasury bonds, it will add inflation to USA. Or if China converts dollar reserves into reserves of strategic resources, USA will not expect such things to happen. Thus, USA will not be unwilling to cooperate with China in monetary policies. The realistic measures taken by China are adjust the structure of foreign exchange reserves by converting dollar reserves into oil, gold and Euro reserves, participate in the various levels of international currency cooperation and push RMB internationalization forward, so as to make adequate preparations in respond to the next potential dollar crisis.2. There are political and economic bases for currency cooperation between China and EU. Such cooperation may involve the following three aspects. First, China can properly adjust the structure of its foreign exchange reserves by increasing Euro reserves via currency swap so as to change the dominance of dollar reserves in its foreign exchange reserves. Second, China can make adjustments in the denominated currencies used in international trade between China and EU countries by adopting part Euro and part RMB as settlement currencies. Third, China should enhance the financial cooperation with EU by making best use of the advanced financial markets in Europe. It can issue RMB denominated assets under the auspices of European financial markets so as to enlarge the investment channels of overseas RMB.3. Whether there is possibility of currency cooperation between China and Japan is determined by whether the two countries can establish political relationship of mutual trust and share common interests. The main objective of such cooperation is to maintain the stability of exchange rates in the two countries and to mitigate the vulnerabilities of the two relevant currencies to the changes in dollar exchange rate. The two countries should coordinate closely and recognize the importance of cooperation. The currency maintenance mechanism established in East Asian region can only be realized when the said cooperation can be strengthened. First, China and Japan can mutually provide intervention funds via currency swap under the circumstances of potential currency crisis as a result of sharp short-term capital flows. Second, they should exchange economic and foreign exchange information for each other and coordinate in monetary policies; establish a precautionary supervisory agency of currency crisis; advocate to develop a stand-by credit fund in East Asian areas and to act as the lender of last resort when financial crisis occurs. The contributions can be set on the basis of the holdings of foreign reserves of participating countries.4. The current currency cooperation in East Asian areas is more concerned about the exchanges of information as well as the coordination in monetary policies, which will strengthen the mutual understandings and trusts without excessive assignment of the sovereignty of economic policies in the relevant countries. China should play a leading role in the stage. It should enhance the cooperation on monetary policies so as to stabilize the regional economy, but also create sound regional environment for RMB internationalization by using its foreign exchange reserves to coordinate with the regional management agency. To increase the influence of RMB in the region, first, China should consistently enhance its economic strength and try to become the largest trade partner in the region by supplanting USA, so as to widen the influence of RMB as a settlement currency for regional trade. Second, China should establish RMB offshore market by cooperating with relevant countries, push the liberalization of RMB interest rate and exchange rate as well as convertibility of RMB capital account forward, so as to enlarge the influence of RMB as a regional investment currency. Third, China should continuously sign currency swap agreements with East Asian countries and create conditions for RMB to become a regional reserve currency.5. The currency integration between the mainland China and the three regions such as Hong Kong, Macau and Taiwan lays a good foundation for RMB internationalization. During the process, RMB will gradually become the essential settlement, payment and reserve currency. And the currency integration should phase in as follows:First, the currency integration can be firstly taken place between Hong Kong and Macau for they have close economic ties, connected geographical locations and share similar history and culture context. Furthermore, Macau has already implemented a pegged-to-HKD exchange rate system. Therefore, we can unify the currencies in the two regions in the first place. Second, the currency cooperation between the mainland China and Hong Kong and Macau regions should be strengthened. Especially under the circumstances of imperfect convertibility of RMB, we can establish RMB overseas clearing center, RMB overseas forward foreign exchange market and RMB denominated financial products market in Hong Kong, so as to facilitate RMB becoming a settlement, investment and reserve currency in the mainland and the three regions, which is expected to lay foundation for RMB regionalization and internationalization in the future.Third, with the much closer ties between the mainland and the three regions and the fulfillment of currency integration between HKD and Macau dollar, we should integrate RMB, HKD and Macau dollar by using RMB to settle international trades, to make investments and to hold reserves. It is certainly that there is less possibility of Taiwan participating in the unified currency in the short run because of political reasons. The more realistic action is to make efforts to develop the common market in China and Taiwan to facilitate their economic and trading activities. What's more, we should encourage the openness of financial market in China and Taiwan to facilitate their financial cooperation. With their economic and trading ties becoming increasingly closer, the degree of their financial cooperation will be enhanced, and they will also make new progress in the currency cooperation.Potential InnovationsIn view of my limited academic level, I only point out some viewpoints and ideas on the following concerned issues:Firstly, in the context of frequent occurrence of global financial crises and increasingly deepened impacts of developed economies on our country, the thesis analyzes the spillover effects of Fed monetary policies on China from three aspects, namely, the impacts on the internal and external balance of our country, the stability of RMB exchange rate and effectiveness of our monetary policies. And thus, it points out that the main block to monetary policy coordination between China and USA is due to the differences between the objectives of monetary policies, over-emphasis on the independence of monetary policies by developed economies, and difficulty in establishing mutual political trust between China and developed economies. Secondly, the thesis compares RMB, JPY and Asian currency modes of East Asian currency cooperation from the point of view of China. It suggests that China should push the mode of East Asian currency cooperation with RMB as a dominance. If it is possible to realize the said objective, China will face the following two kinds of cost. One cost is that the obligation to maintain the stability of RMB will impair the dependence of our monetary policies. Another cost is that the frequent inflows and outflows of overseas RMB may result in the turbulence in Chinese financial market.Thirdly, the thesis believes that there are conditions in which an optimal currency zone will be established in the mainland of China and Hong Kong, Macau and Taiwan. The final result is that RMB should gradually supersede HKD, Macau dollar and Taiwan Yuan, which is different from Euro Zone where one new common currency is issued. Whether the optimal currency zone could be realized and sustained will de determined by whether the possible macro-economic regulation costs could be effectively appraised and controlled. Especially when the four areas are suffered from different external shocks or in different stages of economic cycle, the autonomy of policy regulation will be impaired, which will increase the costs of macro-economic regulation or even cause the failure of currency cooperation.
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