An Analysis Of The Status Quo And Influencing Factors Of RMB Settlement In Cross - Border Trade

In recent years, the economic globalization develops constantly. Since China joined the WTO, its economy scales and strength continue growing, and China has become the world’s second largest economy. The expanding of China’s foreign trade and the stable value of RMB provide a certain basis and conditions for RMB going out. However, nowadays dollars and euros are widely used and the RMB does not belong to the international currency in the current dollar-dominated international monetary system. RMB’s international status is not consistent with China’s remarkable economic status.The international economic and financial situation provides the opportunity for our country to take an active part in promoting the reform of the international monetary system. As a result, the globalization of RMB is very necessary. Promoting the internationalization of RMB has three steps:the first step is to make RMB the cross-trade settlement; the second step is to speed up the RMB capital account convertibility, making it investable; the third step is to promote the reform of the RMB exchange rate formation mechanism, so that foreign central banks are willing to hold RMB as a reserve currency. Therefore, cross-border RMB trade settlement is the first step to promote the internationalization of RMB. In July 2009, Cross border trade RMB settlement pilot started formally, which marked the RMB internationalization entering a substantive stage. Until now, cross-border trade RMB settlement has been more than five years of implementation, during which cross-border trade RMB settlement achieved rapid development. However, there were still several problems during the development of cross-border trade RMB settlement, such as the imbalances of settlement region and the import and export settlement.As a result, it’s very necessary to make clear the development of the business and find out the influential aspects. That’s the key purpose of the study.First of all, the paper briefly introduced the research background and significance, the research contents and methods. Then, the paper systematically introduced the international trade settlement currency choice theory and the existing RMB settlement theories. On the basis of theoretical study in Chapter 2, the paper stated present situations and development characteristics of cross-border trade RMB settlement. In Chapter 4, we analyzed that China’s economic strength, region trade scale, the appreciation trend of RMB, the price scissors of shore and offshore RMB exchange rate, and the network externality in international currency transactions are the key aspects that influenced the cross-border trade RMB settlement.In Chapter 5, we made an empirical research through the establishment of the VAR model, impulse response analysis and variance decomposition. Through theoretical and empirical research, this paper mainly drew the following conclusions:1) China’s cross-border trade RMB settlement is influenced by many micro and macro factors, including China’s economic strength, region trade scale, the appreciation trend of RMB, the price scissors of shore and offshore RMB exchange rate, and the network externality in international currency transactions and so on.2) There are long-term equilibrium relationships between cross-border trade settlement amount in RMB and growth rate of industrial value in China, China’s share of world trade, the appreciation trend of RMB and the price scissors of shore and offshore RMB exchange rate 3) There are positive relationship between the amount of cross-border trade RMB settlement and other four variables.4) Through the variance decomposition, we found out that the appreciation trend of RMB gave 25.79% explanatory power to the amount of RMB settlement, which is the best explanation. The explanatory power of price scissors of shore and offshore RMB exchange rate is 25.4%, which came the second. Besides, China’s share of world trade gave 21.3% explanation and the growth rate of industry value gave 12.6%. 5) Through the comparison with yen’s globalization, the paper concluded that the unstable of yen’s value, Japanese’s trade structure and the high transaction cost were reasons why yen’s globalization failed.Finally, after the theoretical and empirical analysis of the influence factors, this paper gave related policy advices which can promote the development of China’s cross-border trade RMB settlement.