Study For RMB Internationalization

The international monetary competition reflects the competition of economic strength among various economies. The internationalization degree of a country's currency is a measure of the country's economic status, which is of great significance to the national economy. Internationalization of a certain currency is an incremental process of being international settlement, invoicing and reserve currency, with the economic development and enhance of the country's stature and prominence on the world stage.With China's rapid economic growth as well as its rising status in international political and economic affairs, RMB internationalization is of great concern. The global financial crisis triggered by the mortgage crisis in USA in year end 2007 has put forward the importance of reform and diversity of international monetary system, which provided great chances for RMB internationalization. RMB Swap and trade settlement accelerated the process of RMB internationalization. In this case, my paper studies theoretical foundation and practice of RMB internationalization.First of all, the paper clearly defines a serious of economic concepts including currency, monetary functions, international monetary system, currency internationalization, etc. On this base, the paper analyzes the necessary conditions of RMB internationalization, and through data statistics, inductive deductive research methods, the paper concludes that RMB internationalization has already demonstrated the necessary political and economic base. The paper then compares the different internationalization process of three major international currencies including U.S. dollar, Euro and Japanese Yen, and analyzes their reference to RMB internationalization. After that, based on analysis of prisoner's dilemma of game theory, and the theory of optimum currency area, the paper put forward several recommendations on which way we should choose for RMB internationalization, and concludes that the internationalization of RMB should choose step-by-step strategy, and start from surrounding countries, then to Asian-wide, and finally reach world-wide. In the end, the paper put forward several positive recommendations and countermeasure on how to solve the practical problems and prevent all types of risk during the process of RMB internationalization, such as the negative impact of exchange fluctuation, unexpected react to RMB trade settlement, and the current immature financial system.