Take Advantage Of Hong Kong Financial Market To Promote The Internationalization Of The RMB: Path Selection And Risk Assessment

Internationalization of a currency is a process the currency of a country becomes widely used as the role of yardstick of value, means of payment, storage and other monetary functions in an international scale and exceeds the boundaries of the country, and ultimately becomes International Currency. Western monetary theory considered that this process can be classified as three stages which had no strict boundaries: liberalization of the currency, regionalization and internationalization. From this perspective, at present, the Yuan can be localized in the overlap region of the liberalization and regionalization stage. Though the Yuan has not yet achieved the liberalization, our capital accounts are not yet open, interest rates and exchange rates are not highly market-oriented, and there has been a prototype of regionalization.From the perspective of reasons: in East Asian and South-East Asian region, particularly China's neighboring countries, non-residents demand of RMB is the main force to promote RMB internationalization. However, it is the unfinished RMB liberalization which hinders RMB playing international monetary functions, and further hinders the non-residents RMB demand to develop to a higher level. But offshore financial theory tells us that it is the offshore financial market performs the transformation function. As a major gathering place for offshore RMB financial business, Hong Kong has advantages in geopolitical, financial system, business system and so on, and the Hong Kong market will play an important role in the internationalization of RMB. This is conducive not only to RMB internationalization, the Mainland's financial reform, but also conducive to consolidate Hong Kong's international status as a financial centre.Considering the status quo of RMB Internationalization, Hong Kong and the mainland's financial market being parallel to each other and under the conditions of one country, two systems, we think that Hong Kong should act as the destination of offshore RMB assets, trading market for offshore RMB, and the hub of the offshore RMB return. Specifically, Hong Kong can develop a multi-level RMB trading market through reasonably guide its supply; and can clear both inside and outside circulation of RMB through cooperating with the Mainland's financial opening up; provide comprehensive risk management measures through cooperating with the Mainland's financial reform.In addition, it is our advantage over other countries to use the two parallel financial markets under one country framework to promote RMB internationalization. Due to this, we will not only face risks brought by general offshore financial market, but also encounter other risks that other countries had never seen. We should seriously concern in our practice.