A Basic Analysis Of The Promotion Of RMB Internationalization

This paper seeks to identify the context of China’s promotion of the yuan into international reserve currency analyzing data collection and is able to give possible implications about how much possible the yuan is accepted as a key currency in the international community at present, and how much the revaluated yuan will impact upon China, Korea and international society in the future, when the yuan has become as an international reserve currency.China has proactively promoted the yuan to be accepted as a key currency after the outbreak of worldwide financial crisis in2008. In order to promote the yuan as a part of key currencies, current Chinese central government manages foreign exchange and exchange rate exhaustively and has entered into Yuan Trade Payment Arrangement and Currency Swap Arrangement with Korea. In addition, China has been gradually developing promotional circumstances for the yuan as an international currency through efforts to extend the issuance of the yuan bonds.As compared with Japan’s and EU’s trials to promote Yen and Euro as key currencies, China’s yuan has its own stronger advantages in promoting yuan than Yen and Euro. The acceptance of renminbi as a new reserve currency in the world has positive effects upon China, such as China’s better international position, its stronger voices on world economy and politics, and seigniorage effect, whereas it has also negative effects on China, such as Chinese government’s weaker control due to the open door of Chinese financial market, and higher exchange rate due to enhanced obligations in the international society. On the other hand, the acceptance of the yuan as a new key currency in the world has positive effects on Korea, such as higher export business profitability and weaker dollar dependency owing to higher exchange rate of yuan vs. won, whereas it has also negative effects upon Korea, such as export dependency on China and higher political and economical dependency. In the international society, it is expected that the promotion of yuan into an international currency will bring about the devaluation of American dollar and potential great change in current America’s leadership of world economy system. In view of promotional backgrounds and current international economical circumstances, it is very likely that China’s yuan will be accepted as a key currency, and if Chinese central government more firmly establishes circumstances allowing for yuan to be promoted as an international reserve currency. Then, it is expected that yuan will take its own position as a new key currency comparable to American dollar.