Research On The Impact Of RMB Internationalization On China-ASEAN Financial Market Integration

Since the start of RMB internationalization,the world has made remarkable achievements in cross-border trade and investment,foreign exchange transactions,international payments,and international bonds.Through the signing of currency swap agreements with ASEAN countries,the promotion of cross-border trade,the settlement of investment renminbi,the cross-border credit of RMB,the issuance of RMB international bonds,the direct exchange of RMB with the currencies of major ASEAN countries,and so on,RMB has built a certain scale of currency trading network in ASEAN region.At the same time,China has accelerated the pace of financial market development and opening up,cross-border RMB financial products investment system barriers are constantly reduced,investment channels are more diversified.Because of the externality of currency trading network,the rapid development of domestic financial market and the relaxation of financial regulation,the transaction cost of crossborder RMB assets decreases,and the proportion of RMB assets in cross-border financial assets allocation of regional investors is increasing.According to the "oneprice law" of asset trading,the enhancement of capital liquidity brought by cross-border financial asset allocation will make the price of similar assets tend to converge in the financial markets of various countries and appear the trend of integration.Does the internationalization of RMB promote the integration of China-ASEAN financial market? What policy inspiration does this have for the continuous promotion of RMB internationalization and the strengthening of regional financial cooperation? In order to answer the above questions,this paper studies the influence of RMB internationalization on the integration of regional financial markets by constructing theoretical framework and econometric model.Firstly,this paper reviews the theoretical origin of the impact of currency internationalization on the integration of regional financial markets,with emphasis on the international currency substitution and conversion transaction cost theory,the theory of currency exchange network externalities,and the theory of cross-border investment of financial assets.So that the study of the paper has a systematic theoretical support.Then,taking the euro experience as an example,this paper analyzes the influence of euro start-up and its internationalization on the integration of European financial markets,and sums up the general experience and enlightenment of currency internationalization in the impact of regional financial market integration.Secondly,the logical relationship between RMB internationalization and the integration of China-ASEAN money market is deduced based on the theory of transaction cost of currency conversion and the theory of interest rate parity.Then it analyzes the main channels of RMB internationalization affecting the integration of regional money market.On the basis of measuring and examining the integration of China-ASEAN money market,A time-varying parametric component vector autoregressive model(SV-TVP-SVAR)with stochastic volatility is constructed to analyze the impact of RMB internationalization on the integration of regional money markets.The results show that the internationalization of RMB can significantly promote the integration of China-ASEAN money market.With the entry of Chinaundefineds economy into the new normal and the slowdown of economic growth,the influence of RMB internationalization on the integration of regional money markets has been reduced.Nevertheless,the internationalization of RMB has maintained a positive impact on the integration of China-ASEAN money market.Then,based on the theory of cross-border investment portfolio based on stock assets and the theory of transaction cost of currency conversion,the influence mechanism of RMB internationalization on the integration of China-ASEAN stock market is deduced.It also analyzes the main channels of RMB internationalization affecting the integration of regional stock market.On the basis of constructing DCCMVGARCH model to study the dynamic correlation of stock market return rate of China-ASEAN major countries,and to measure the integration of regional stock market with the index of cross-market income dispersion,and to examine it in sections.The structural vector autoregressive model(SV-TVP-SVAR)with time-varying parameters with random volatility is used to analyze the effect of RMB internationalization on the integration of regional stock markets.The results show that the internationalization of RMB has a significant positive impact on the integration of regional stock market.But over time,the magnitude of the impact is different.After the 2008 financial crisis,China's economy recovered relatively quickly and played a greater role in the world economy.Therefore,the increase in the degree of internationalization of the renminbi has a greater impact on the integration of the ASEAN stock market.After the Chinese economy entered a new normal,the economic growth rate slowed down,and the influence of the internationalization of the RMB on the regional stock market integration was reduced.Finally,the transnational portfolio theory based on international bond assets and the theoretical model of currency conversion transaction cost analysis show that the higher the degree of internationalization of RMB,the lower the exchange rate risk and financing cost,the higher the degree of internationalization of RMB,the lower the exchange rate risk and financing cost.The higher the share of renminbi bonds in ASEAN investorsundefined cross-border portfolios.The internationalization of RMB mainly affects the integration of regional bond market through onshore and offshore RMB bond market.On the basis of using DCC-MVGARCH model to investigate the dynamic correlation of bond market volatility between China and ASEAN,and to measure and analyze the integration of regional bond market by using the index of cross-market income dispersion,The structural vector autoregressive model(SV-TVPSVAR)with time-varying parameters with random volatility is used to analyze the effect of RMB internationalization on the integration of regional stock markets.The results show that the increase in the degree of internationalization of the renminbi also has a positive impact on the integration of the regional bond market,and this effect has also changed over time.After the Chinese economy entered a new normal,the slowdown in economic growth also reduced the influence of the internationalization of the RMB on the integration of the regional bond market.Based on the analysis of the reasons for the research conclusions,this paper proposes the following policy recommendations: 1.Make full use of the characteristics of broad common interests and trade complementarity between China and ASEAN countries,continue to promote the regional use of RMB under trade,expand the scale of the RMB trading network,and raise the currency.The externalities of the network.2.Strengthening the financial trading functions of the RMB in the ASEAN region through direct investment,RMB cross-border credit market,construction of foreign exchange market,and improvement of financial infrastructure.3.Actively develop domestic financial markets,especially the bond market.4.Using the platform and institutional framework of the China-ASEAN Free Trade Area,actively participate in various economic and trade financial cooperation and policy coordination in the region,and promote the construction of regional financial cooperation systems.I hope that the research in this paper can provide theoretical and practical reference for China's RMB internationalization strategy,financial cooperation with the ASEAN region,and other countries along the “Belt and Road”.