Analysis Of Effects And Movements Of Position For Forex Purchase Based On RMB Settlement Of Cross-border Trade

The most important factor of the outbreak of the new round of inflation in2010-2011is the excess liquidity caused by the huge position for forex purchase. In2008-2009, the proportion of position for forex purchase accounted for monetary money is the peak over the years, which means that position for forex purchase largely affect the2010-2011outbreak of inflation.China’s huge foreign exchange reserves lead to passive delivery of the huge amount of position for forex purchase, which can impact on our national economy in two aspects. On the one hand, from the government level, the monetary policy partially offset by the passive delivery of huge position for forex purchase; On the other hand, In recent years, position for forex purchase increases the endogenous money supply, which affects the stability of price level.This time, a new point of view in academic departments appears for the study of the influencing factors of position for forex purchase movements, one of the main reasons is the launching of RMB settlement of cross-border trade. After the outbreak of2008subprime crisis, China accelerates the strategy of internationalization of RMB, and RMB settlement of cross-border trade from2009. Some scholars believe that after nearly four years of practice, the development of RMB settlement of cross-border trade appeared some problems, one is the imbalances of settlement. They believe the settlement imbalance is a new factor which results in the increasing of position for forex purchase in recent years. Because of the lack of current China’s comprehensive strength, on the selection process of cross-border trade currency, the U.S. dollar and other major existing settlement currency is still the first choice for most enterprises. The reason that some companies have selected RMB is based on the expectation of RMB appreciation. In addition, the country’s import and export trade structure is still unbalanced, thus resulting into the RMB settlement imbalance.This paper believes that the settlement imbalances can not be simply characterized as "good" or "bad", cause of carrying out cross-border trade RMB settlement is based on a premise-RMB internationalization strategy. To become a major international settlement currency, enough RMB stock overseas is necessary. This relates to the outflow of RMB. Under the conditions that China’s capital account is not open, currency swap is a major way of the outflow of RMB. Another important way of the outflow of RMB must attach to the route of foreign trade. Therefore, from this perspective, the settlement imbalance is not necessarily a bad thing.And the study found, under the reform of the exchange settlement and sales system, foreign exchange is not necessary to completely converted into RMB and result in net inflow or outflow of RMB. The net income of RMB in cross-border trade is also regarded as position for forex purchase in this paper.A simple model is established in this article to verify my findings. Ultimately it proves that under the obligatory foreign exchange-selling system, even if the settlement imbalances exist, carrying out RMB settlement of cross-border trade will only affect foreign exchange earnings, but not affect the position for forex purchase movements. But after the cancel of the obligatory foreign exchange-selling system, to carry out RMB settlement of cross-border trade will affect the movements of position for forex purchase. Also I find the relationship between the impact factors of position for forex purchase movements in the variable formula derivation.Structural setting of this article in the first chapter discusses the background and significance of the topic, research methods and innovation; second chapter summarizes monetary competition theory, theory of monetary choosing in international trade, theory of the RMB settlement of cross-border trade as well as the impact factors of position for forex purchase.Next chapter, I have built a model, and subsequently Infers the impact of carrying out the RMB settlement of the cross-border trade for the position for forex purchase movements, relative to use just U.S dollars, under the context of wishes of foreign exchange settlement system. And in the fourth chapter, I will further analyze the influence factors on the position for forex purchase, and do some contrast with Russia, the most similar country to us. Then, in the fifth chapter, I analyze the influence on inflation and monetary policy, under the context of carrying out RMB settlement of cross-border trade, and offer suggestions and help in the last chapter.