Hong Kong Dollar And Renminbi Monetary Integration Of The Feasibility Analysis

Since the 90s in 20th century, the trend of global economic integration and financial liberalization has been continuously strengthened, while the theories about currency integration have increased. The birth of the euro in 2000, as well as the stability of circulation for nearly a decade, provides a successful example for the Theory of Optimum Currency Areas. Accordingly, the theory put forward a tentative idea to create "Asian dollar" in the Asia and to create "Zhong Yuan" in Greater China. Because the Asian dollar's creation involves a lot of countries, the creation of Zhong Yuan seems to be a more practical objective for the recent currency integration of our country. So whether the cost of our country's accession to the currency area is greater than the cost, and whether the conditions for monetary integration in sophisticated, are worthy of thorough and meticulous researches. In the research achievement now available, the Greater China includes mainland China, Taiwan, Hong Kong and Macao Special Administrative Region. Taking the political sensitivity of the Taiwan region, and the too small scale of Macau economy into account, this thesis is only to study the possibility of monetary integration the mainland and Hong Kong.This thesis based on the existing research achievements and uses the theoretical and empirical researches by combining qualitative and quantitative analysis, to study the feasibility of currency integration of HK dollar and RMB. Firstly, this thesis introduces the background and significance of monetary integration between HK dollar and RMB, reviews the development of the Theory of Optimum Currency Areas and comments on the domestic researches. Secondly, this thesis adopts modern statistical method and the VAR model with the symmetry of economic shocks from the perspective of the mainland and Hong Kong's supply and demand shocks. The results showed that between the mainland and Hong Kong supply shocks have a high symmetry, but symmetry of demand shocks is not high. Thirdly, this thesis uses many cases and data to carry out cost-profit analysis on Hong Kong dollar and RMB currency integration. The results shows that no matter the overall test, or to examine the mainland and Hong Kong's costs and profits separately, the result is that the profit is greater than the cost, especially in the long run. Finally this thesis suggests that the process of monetary integration is a long-term process, which should be divided into three stages: (1) achievement of the mainland and Hong Kong's free flow of elements and establishment of a unified large market (2) implementation of the free convertibility of RMB capital and Hong Kong's offshore financial center (3) the RMB becoming the world currency, Hong Kong abandoning the HK dollar and adopting RMB.