A Study Of Early Warning System On RMB Offshore Financial Market Risk

Since the U.S. subprime mortgage crisis, all the central banks has to adopt the quantitative easing policy to stimulate the economy and reduce the loss. The RMB rapidly increase in international status, as it provides a historic opportunity of world currency of payment. China’s capital and financial items are not fully convertible, blindly adopting internationalization can only be counterproductive. Therefore, the construction of offshore financial market has become an important means of the internationalization of the RMB at present. Because of the characteristics of the system, different kinds of risk exist. There is a natural link between offshore and onshore, so the risk of offshore market may pose a threat to the financial security of our country. At this point, the scientific measurement and early warning of RMB offshore financial risk is imminent.This paper analyzes the basic characteristics and business structure of four RMB offshore financial markets and the reference based on the research achievements of many researchers. Through the analysis of RMB offshore financial market risk exposure, this paper scientifically selects six major risks and 13 early warning indicators to form the early warning index system. Subsequently, this paper uses distribution fitting method to determine the risk threshold value of each index and the entropy weight method to set weight of each index for the early warning to build a comprehensive risk index. Finally, the Elman artificial neural network model is applied for 2015 RMB offshore financial risk early-warning.Through empirical study, this paper found that the overall risk of RMB offshore financial market is controllable, which cannot break out in a short period.3 of the 13 early-warning indexes issued a warning signal.Finally, combining with China’s special economic system and the basic characteristics of the offshore market, the paper gives some policy suggestions.