Research RMB Offshore Market And Onshore Market Linkage Relationships

International experience shows that the formation and development of offshorefinancial markets is an important indicator of financial globalization, not only to bringa revolutionary change to the traditional onshore financial markets, but also push theU.S. dollar and the Japanese yen to become an important driving force of internationalreserve currency. In recent years, the pace of RMB internationalization sped up, therapid development of offshore RMB markets in Hong Kong and London havefacilitated the internationalization of the RMB, and the RMB offshore market and theonshore market linkage growing.In the future international monetary system, theRenminbi will become an important trading and reserve currency, the establishmentof offshore RMB markets is a necessary process leading to the internationalization ofRMB.This paper follows the logic of identifying the problem, analyze it and solve it.The in-depth analysis and systematic discussion of the linkage and interactionbetween the RMB offshore and onshore markets is based on a theoretical andhistorical perspective, a combination of qualitative and quantitative research, with afocus on the analysis of the situation on the ground and policy options.The paper begins with a review of recent literature on offshore and onshoremarkets, to be follwed by the analysis of the linkage and interations between theoffshore and onshore markets based on the interest rate parity theory, the theory ofinternational payments, the financial innovation theory, and the currency crisis theory.Next, the paper focuses on analyzing the characteristics, businesses, mechanisms andtrends, of Hong Kong and other offshore financial markets, the the main problemsfaced by the offshore RMB money market,foreign exchange market,and bond market.In the third part,by making use of the latest data cointegration test, Granger causalitytest, the VAR model and the impulse response analysis, the author studied the linkagebetween the onshore renminbi market and the Hong Kong offshore market interestrates and exchange rates, and made an in-depth analysis of the channels of capitalflow, arbitrage model, and interaction mechanisms of the onshore and offshore markets. In the fourth part, it goes on to study the linkage of the dollar, yen and bahtoffshore markets with their onshore markets with an ecconometrics approach.summarize the impact of the offshore market development for the internationalizationof the currency of a country and its enlightenment to China.Lastly, the paper put forthsome policy proposals on the development of offshore RMB markets. It pointed outthe onshore financial market reform and the development of the offshore marketsshould be acceletrated, and financial supervision and coordination should bestrengthened.