Research On RMB Internationalization In The Context Of The Reforming Of International Monetary System

The2008global financial crisis has exposed the great defect of the USD-dominated international monetary system. The voice demanding to reform international monetary system keeps rising after the crisis. While China has become the world’s second largest economy with the largest trade volume and foreign exchange reserves, the process of RMB internationalization is speeding up with the joint driven force of international and domestic. Remarkable progresses in cross-border settlement and offshore markets have been achieved, however, the internationalization of RMB is still facing a series of difficulties and challenges because of the very specific conditions of China.Firstly, this paper reviews the relevant theory about the currency internationalization, then analyzes the relationship between the current international monetary system reform and the RMB internationalization. Secondly, the paper summarizes the latest achievements in cross-border settlement and offshore markets and finds that the inadequate convertibility of Chinese capital account has become the major resistance for the internationalization of the RMB. Subsequently it conducts analysis about how the capital account liberalization will affect the future development of RMB internationalization.In order to demonstrate the potential and prospect of the RMB internationalization, the paper selects the share international bond market as the indicator to represent the degree of internationalization of different currencies, uses the data of34countries from1993to2012in the regression analysis and establishes a model to reveal the main determinants of the international bond issuance. The theoretical estimation of the current demand for the RMB international bonds and its comparison with the real situation infers the huge potential for development of offshore RMB bond market. Finally, the paper believes that the RMB internationalization is an inevitable strategic choice that complies with the rise of Chinese economy, this will be a process involved with complex interaction between the market and the changing policy framework. During the gradual opening of the capital account, Chinese government needs to improve the domestic and offshore financial system continually, especially promotes the offshore RMB bond market to accelerate the role conversion of RMB from a trade settlement currency to a real international currency that is widely used in investment and reservation.