The Study On RMB Internationalization

China, being the biggest trade companion of many up-coming marketingeconomies, its main trade settlement currency is USD. However, with the developmentof Chinese economy and the advancement of RMB internationalization, the settlementcurrency will certainly change from USD to RMB. From July,2009to June,2010, theexperimental points using RMB as cross-border settlement currency have beenexpanded to20cities all around China; the settlement range has been widened, fromHong Kong to ASEAN (the Association of Southeast Asian Nations); the trade volumealso grew rapidly. At present, the emerging markets account60%of China’s total tradevolume, which is49%more than that of10years ago. It can be optimisticallyestimated that half of the emerging markets trade volume can be settled by RMBwithin3to5years, and RMB will be developed into one of the three major settlementcurrencies in the world.Correspondingly, international financial market for RMB has also achieved greatimprovement, especially the development of Hong-Kong-centered off shore financialmarket. Till the end of December,2010, the deposits in Hong Kong Bank has rocked to314.9million Yuan compared to the62.7million Yuan in the end of2009. The dailyincreasing RMB deposits in Hong Kong promoted the forming of RMB bond marketsand all kinds of offshore financial instruments, including RMB derivatives. China hassigned a total amount of1.3trillion Local currency swap agreement with Argentina,Belarus and other12countries and regions. Recently, Japan was allowed to purchase65billion RMB of Chinese treasuries. Admittedly, the last two years have witnessedthe significant development of RMB internalization.The thesis starts from Marx international currency theory, analyzes the decisivefactors and the theoretical basis for currency internalization, and provides afundamental base for the study of RMB internalization. Then it clarifies theinevitability and the present situation for RMB internalization, and points out thefeatures of RMB internalization and potential difficulties. Later it discusses thebenefits and costs in detail for RMB to go internationally. By analyzing the internationalization of USD, Deutsch Mark, and Japanese Yin, it finds out the roadmapfor the internationalization of RMB. At last, it gives proposals and suggestions in lightof China’s situation, such as constructing the service system for the cross-border use ofRMB, foster the development of medium-and semi-banks and optimize bankingsystem, accelerate the pace for Shanghai to be the international financial center,gradually permit non-Chinese residents to hold and use RMB for transactions, andencourage the use of RMB in capital account transactions.