Research On Factors Of RMB Settlement In Cross-border Trade

In July2009, with the double drive of evolution of international economicsituation and strong market demand, the pilot of RMB settlement in cross-border tradewas officially launched. From the perspective of international situation, the globalfinancial crisis exposed the shortcomings of international monetary system. Meanwhile,import and export enterprises faced more increased exchange rate risk in the tradesettlement. From the point of view of Chinese economic development, the RMBexchange rate rose steadily, the international status has improved, which enhanced thevoice of using RMB as a trade settlement currency. To this end, the Chinesegovernment launched RMB internationalization with a starting point of RMBsettlement in cross-border trade. RMB settlement in cross-border trade can favorenterprises to avoid exchange rate risk thus decrease foreign exchange losses.Simultaneously, it not only conducive to the expansion of RMB in cross-border tradeand investment, but also accelerate the internationalization of RMB in the phase ofmost critical and basic. With the continuous improvement of policies and measures, theprocess of RMB settlement in cross-border trade develops rapidly. However, there aremany problems and challenges. Purpose of this paper is to finding out the maininfluencing factors of RMB settlement in cross-border trade, thus promoting the RMBsettlement functions smoothly.Firstly, the paper introduces relevant theoretical foundation of RMB settlement incross-border trade, detailed analyzes the development of RMB settlement incross-border trade. Secondly, based on the settlement currency theory of internationaltrade, the paper combines trade、economic with financial multiple variables to studythe influencing factors. Co-integration test draws that variables presence long-termco-integration. Variance decomposition shows these factors that exerting the effect ofshock to the RMB settlement functions are ranked in decreasing order based on thedegree of the influence: the growth rate of per capita GDP, the proportion of trade withdeveloped countries, the growth rate of trade with ASEAN, the RMB real effectiveexchange rate volatility. It is certified that exchange rate fluctuation has a negative anddynamic impact on the proportion of RMB settlement in cross-border trade. Finally,combining with empirical, this paper proposes some suggestions to develop RMBsettlement in cross-border trade. It includes that raising GDP per capita and trade quality, coordinating to promote capital account liberalization and offshore RMBmarket construction, strengthening trade cooperation with ASEAN countries andenhancing enterprises management capabilities in exchange rate risk.