| The establishment and development of international offshore financial markets have more than60years’ history so far, from the initial single European market to the offshore market that covers all the major countries and regions of the world with rich variety of currencies. As a kind of typical financial innovation, offshore finance widens the financial business scope, increases types of financial transactions and makes great contributions to global economic integration processes. Under the trend, China has been trying to pilot offshore financial business in mainland market since Reform and Opening Up. As China’s foreign trade and economic activity is increasingly frequent in recent years, outbound investment of institutions within the territory, inbound investment of foreign institutions and international trade settlement etc. have achieved rapid development. Due to the China’s long term foreign trade surplus, foreign currency reserves rise year by year. By the end of2012, the surplus of the current account was213.8billion dollars, the total of foreign currency reserves was3.31trillion dollars. In addition, the scale of international trade between China and other countries has been expanded. The using scope, frequency and quantity of RMB has been increased. Because of the unique advantages, Hong Kong area as the first choice establishing offshore RMB market began to gradually develop offshore RMB business.In the process of promoting RMB internationalization, establishment and development of the offshore RMB market has played a key role. The rising strength of related policies made by the People’s Bank of China and the Hong Kong Monetary Authority, development of Hong Kong RMB offshore market have become inevitable trend. The supply and demand scale of Hong Kong market is expanding increasingly and having money creation ability preliminarily. However, at the same time, Hong Kong offshore market is also bring a certain impact and influence to onshore market. Once these offshore funds go back into the domestic market in a large-scale abnormally, it will affect the domestic market in multiple pathways. Interest and exchange rate marketization in domestic market haven’t been fully realized, the capital account of international trade has not been fully opened, these reality factors brings more severe challenges to the formulation and implementation of monetary policy, makes more difficulties of macroeconomic regulation and control in domestic market and related cost rising. So effective regulation of offshore RMB cross-border capital flows becomes the most arduous task at this stage. The research significance of this article is that by discussing the reasons of why must develop Hong Kong’s RMB offshore market, how Hong Kong market influence the money supply and exchange rate level of onshore market, analysis the relationship between the two markets’variables on empirical research and put forward effective measures to cope with the adverse effects.Since China joined the WTO, domestic economic development especially the international financial and trade activities have achieved good results. RMB appreciation expectations become more and more strong, the speed of RMB internationalization development are increasing. Under the impetus of the global economic integration, offshore financial market activities have become increasingly active. Through comparative analysis on the differences of international representative of the offshore financial market and offshore market in China’s development, we can sum up the experiences of success and failure of offshore financial business in China. As the established financial center in the Asia-pacific region-Hong Kong, having superior geographical location, unique market advantage and mature market experiences, it becomes the best place for Chinese RMB offshore market consequently. However, there have different degree of differences between the offshore market of Hong Kong and the mainland market in such aspects as system, policy and financial regulations. Theoretically through multiple pathways mass tonier parts of offshore RMB funds could flow into the mainland market and affect it. This article will focus on considering the impact of Hong Kong market to onshore market’s money supply and exchange rate quantitative analysis on the conduction process between the two variables in two markets, and putting forward on more effective and reasonable measures against these adverse effects. The innovation can be summarized as two points in this paper. The first one is the angle of innovation. At present, most research is aimed at study on the impact that the turmoil of international offshore market to the domestic financial market in China, researches on the influence of RMB offshore financial market especially the rising development of Hong Kong RMB offshore market in recent years to the domestic market are relatively few. Under many system constraints of domestic market at this present stage, the development of Hong Kong RMB market is growing up, it has a certain practical significance and research value. The second one is the innovation of empirical analysis. In the research on the relations between the two market information, establish respectively two empirical model. The structure of empirical design is novel. In addition, on the data selection method, the second empirical analysis choosing the high frequency data can show the changes in the flexibility of variables. Previous studies are all using monthly data, however daily exchange rate data can react more the effectiveness of risk conduction between the two markets. The paper selects the latest data from2012to2013and analyzes the correlation of two markets in recent time is consistent with previous research conclusion or not.The lack of this paper can be summarized as two points. The first one is that as the domestic market has not completely liberalized, many mainland market’s information data such as deposit and lending rates remained under a certain degree of control, it brings difficulty of multi-channel empirical studies from information transmission between the two markets. In the future, domestic market will have fully implemented financial liberalization, theory conclusion would be changed. The second one is the RMB offshore business has just not only got a good development in Hong Kong, but also in Taiwan, Singapore, and London etc. Since Feb.2013, the development speed of offshore RMB business in these countries and regions has been rapid at the early time, individual one is even more than Hong Kong market. Their expanding will bring a certain influence to the market in mainland China. In future research, we should attach importance to add analysis on the influence of the offshore RMB markets’development to domestic market making up for the inadequacy of this article’s depth and breadth in research. |
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