Risk Analysis On The RMB Offshore Market Of Hong Kong

The background of economic globalization and financial internationalizationshow that financial exchanges become increasingly frequent between countries andcountries. For our country, RMB outside of the world has become one of the maintasks. And the suggestion that establishing the offshore market as a ‘pioneers’ of theRMB internationalization is recognized by many scholars. As one of the world’sbiggest international center, Hong Kong is very suitable for establishing offshoremarket because of its financial liberalization and infrastructure construction. However,by understanding the situation and problem of the RMB offshore market of HongKong’s, found that it has potential risks in the offshore, bring the potential problemfor the construction of the offshore market in the future.Now the research about the RMB offshore market of Hong Kong is also less athome and abroad. The paper adopts normative analysis rules, reference the theoryabout the risk of offshore market, using all kind of data about offshore business andmake a deep analysis, then got some useful conclusion about the risk on the RMBoffshore market.In addition to the first part of the introduction, this article consists of four parts.The second part analyses the offshore market’s risk and the main reasons fromthe perspective of theory, systemic risk is one of the mainly risk of offshore market,including interest rate risk, exchange rate risk. The impact of onshore financial marketsuch as interest rate risk, exchange rate risk, etc. then expounds the domestic andinternational factors about the risks.There is also some systemic risk, such as creditrisk, liquidity risk and operational risk,etc. And this offshore risk will impact thedomestic economy, including the impact on the domestic financial industry, the risk’sconduction to the onshore market, and the influence for the country monetary policy.In addition, this paper also expounds the factors of this risk at home and abroad.Mainly because of domestic financial reform does not complete, the offshore market’s development is imperfections, and the influence of international financialenvironment.The third part introduces the offshore market’s present situation, characteristicsand existing problem. The development of RMB offshore market is divided into threestages: infancy, the initial formation period and the rapid developing period. It’sconcluded that the offshore market still has some problem.It thinks that the RMBoffshore market of Hong Kong has preliminarily established, and the developmenttrend is good, but because of the offshore market’s loose environment and higherliquidity requirements, the offshore market should develop more mature. Now theoffshore market also has many problems, such as its small scale, liquidity is not strong,and the backflow mechanism is blocked.The fourth part analyzes the risks about offshore market in Hong Kong accordingto the introduction of above. It has the following several kind of risk: the large-scaleflows about RMB, now the amount of RMB deposits continues to increase in HongKong offshore market, RNB cross-border trade settlement also developed rapidly, thenumber of capital flows to offshore market larger and lager, we need to pay attentionto some hot money and the asset bubbles. the speculative arbitrage risk because ofexchange rate, interest rate’s difference between onshore and offshore, and theinfluence of CNH to CNY is also noteworthy, through the study data indicated that thecurrent impact of such risk is small, it’s need to pay attention to the changes in themedium and long term.the external risk of Illegal money laundering activities anddomestic financial reform problem is very important, too.The fifth part provides some suggestions about how to avoid the potential risks,mainly from three Ares: the government and financial authorities, the offshore marketitself and international cooperation. Government should speed up the reform offinancial market, strengthen the construction of law and financial regulation. Theoffshore market should increase the varieties of RMB, expand the scale of offshoremarket and perfect the backflow mechanism. Finally, the evasion of risks should be inline with international standards, and it’s need to establish an international regulatorysystem. The innovative main features: First, by the study of the characteristics on theoffshore market, we got the possible problem of RMB offshore market, as well as thepossibility of risk; second, the paper use the abundant data to analyze the risk factorsfor the offshore market, assess the current situation of the risk; third, Through thecomparison of short-term and long-term, we got different period of the risk status.This article mainly for lack of the points such as: the imperfection of the framestructure. the research of offshore market risk and related policy has somelimitations.Considering the complex economic environment, the data has some biaserrors.and the most important problem is that we failed to use econometric model.