RMB Cross Border Trade Settlement

Since the outbreak of the global financial crisis caused by U.S. subprime mortgages in 2007, the U.S. financial system is facing a credit crisis. In the international trade, the dollar as the major currency for denomination and settlement is in short and its exchange rate fluctuates sharply, which adversely affects the successful payment. In recent years, with China's rapid economic growth and the RMB exchange rate stability, the demand for RMB in neighboring countries increases, and the scale of border trade which is denominated and settled by RMB is expanded.RMB cross border trade settlement pilot officially launched on 1st July,2009, which is a key step for RMB internationalization. In essence, RMB cross border trade settlement means RMB as a currency for denomination and settlement in international trade.Then, relevant government departments issued a series of relevant rules and the RMB cross border trade settlement system is established. On 22nd June,2010, the PBC and other five departments jointly issued a notice that pilot areas and business of RMB cross broder trade settlement are expanded. As of the end of 2010, the cumulative amount of RMB cross-border trade settlement reached 506.34 billion Yuan, but the proportion of RMB settlement volume to the total foreign trade volume of 2010 was only 2.58%, and the relative size is very limited because of many constraints RMB cross-border trade settlemt has. Analyzing these constraints and proposing some suggestions is the starting point of this paper.This paper is consisted of five parts.The first chapter introduces the research background and significance, the current research status in domestic and abroad, the main framework, research, and possible innovations and deficiencies. The second chapter on the cross border trade settlement of currency options theory is the theoretical guidance for the whole paper. The third chapter analyses the development status of RMB cross-border trade settlement and constrsints. In two year, the RMB cross-border trade settlement falls into a fast track of development, but its size is on a limited scale, and there are many constraints. The fourth chapter makes a research on the lesson and enlightenment from Japanese Yen as a currency of cross border trade settlement. Promoting the yen as a currency of cross border trade settlement, Japanese government has taken many effective measures, which offer valuable experience for the development of RMB cross border trade settlement; At the same time, the ration of Yen as a currency of denomination and settlement increases to a certain extent and stops to develop, we should learn lesson from the fluctuations of the yen exchange rate and avoid this situation. The last chapter proposes recommendations to promote the RMB cross-border trade settlement as following: creating favorable conditions for RMB cross-border trade settlement in technical aspects, building smooth output and return channels, establishing RMB offshore financial markets in Hong Kong as soon as possible, improving the RMB exchange rate formation mechanism, forming a cohesive force between the government and foreign trade companies.