The Research Of RMB OFC’s Impact To Mainland Monetary Policy

In1950’s, the offshore financial centers (OFC) firstly appeared in London. OFC provided a new form of financial markets, accelerating the financial liberalization of the countries and regions in Europe, and bringing economic prosperity. OFC expanded to all over the world rapidly, and promoted the process of global economic integration. With the economic development and the RMB international status’ elevation, China needs to establish and develop the RMB offshore financial markets. It’s very important to promote the internationalization of the RMB and China’s domestic financial system reform.However, as an innovative financial form, the development of OFC may impact the monetary policy of the country which issued the offshore money, resulting in shocks to different extends. At present, the RMB OFC is still in its infancy, so the impact on the domestic market is still relatively small, anyhow we shouldn’t ignore the impact. If the RMB OFC continues to expand, its influence is bound to expand at the same time. Simultaneously, China’s capital accounts have not fully opened, the spread between offshore and onshore market will lead to speculative arbitrage of short-term capital inflows. To make sure the RMB OFC to develop steadily and orderly, we must be cautious while control all kinds of risks and strengthen financial supervision.There’re many similarities between RMB OFC and the other famous international OFCs, however, RMB OFC has its particularity. The purpose of this paper is to find right ways of developing RMB OFC. The stay is composed of five major parts:In the first part, we research the OFC credit creation by reviewing the literature at home and abroad. In the second part, we overview the development of the RMB offshore financial market. In the third part, we analyze of the theoretical impact of the RMB OFC to domestic monetary policy, from the monetary aggregates, interest rates and the exchange rate three channels respectively. In the forth part, on the basis of theoretical analysis, we study the magnitude of the impact of RMB OFC to domestic monetary policy by empirical test. At last, we can conclude that the RMB OFC impact the effects of domestic monetary policy, and give some suggestions. At present, to maintain the independence and effectiveness of domestic monetary policy, China should learn from international experience, guiding the RMB offshore financial market developing reasonably, and reducing the negative impact on the domestic market and monetary policy.