"ghost" Currency Area The Possibility Of Realizing Path Selection

Since 1990s,the trend to the global economy and finance has being strengthened. Monetary integration, as a bridge between economy and finance integration has even got the rapid development. It can be said that regional monetary integration has become the dominant trend of finance globalization. Inter-regional finance competition will replace international finance competition. Therefore, different money in China -Hong Kong Dollar, RMB and NTB, should be integrated to be one money, which is a significant strategy for china to strengthen the competitive force as a whole in the international market.Although, for some reasons, it is a long way before we can realize the monetary integration in China. It is very necessary for us to carry out the scientific research and forecasts. As we all know, it took EU 40 years to realize the Euro after Robert Mundell put forth to the theory of Optimum Currency Area (OCA). The process of China's monetary integration will be shortened because of the following reasons. The first is that we can be guided by the advanced theory of OCA. The second is that we can take lessons from European Monetary Integration. The last but the most, the close connection among the mainland, HK and Taiwan provide the most important foundation for China's monetary integration.After China's entry to WTO, Taiwan also joined WTO in the name of the single tariff area. According to the rules of WTO, any part has the responsibility to decrease the tariff, open the market and release the restrictions of foreign investments. All of these will provide chances for the economic integration between China's mainland and Taiwan. Particularly, with the sign of the CEPA, China's government has decided to build a highly free trade area among the mainland Hong Kong and Marco. We can forecast that Taiwan will join the highly free trade area voluntarily sometime in the near future. And then, the four markets in China will be integrated to be one market, "one market need one money"(Emerson, 1992).In this paper, I call the integrated money "Zhong yuan". The realization of "Zhong yuan" will not only increase China'sworld status but also promote China's political unit.The first part of the paper summarizes the old and new theory of OCA at detail in order to provide the theoretical foundation for the analysis in the underlying paper.The second part of this paper discusses the economic implications of "Zhong yuan Currency Area" on the basis of the cost -benefit theory of OCA .The economic implications are mainly as follows: First, it may prevent international finance crisis; Secondly, it can save foreign reserves of China. Thirdly, it can help lift the China's integral competitive force; The last but not the least, it can promote Asian monetary cooperation.The third part of the paper carries out a n empirical analysis on the possibility of the realization of "zhong yuan currency area."The last part of the paper puts forth to a feasible path to realize the "Zhong yuan Currency Area".