A Study Into The Key Factors Affecting Currency Internationalization Based On The Grey Relational Grade

From the three aspects of the functions of currency-store of value, the medium ofexchange and monetary valuation-this paper selects three representative andcomprehensive indexes respectively-"the composition of official foreign exchangereserves","the composition of international foreign exchange market","thecomposition of the issuance of stock in international bond market "-as the threecriterion of evaluation, collecting reliable and detailed statistics, utilizing the EntropyWeight Method and building the Currency Internationalization Index(CII). Based onthe available yearly numbers and statistics, we calculated the CII of six majorinternational currencies (namely, US dollar, euro, British pounds, JapaneseYen,Swing franc and the Australian dollar) in the years2001,2004,2007and2010.On the basis of getting the CII of related currencies and according to the principle ofavailability of statistics, the integrity of indexes, we analyzed the16common factorsaffecting CII from7aspects-economic level, the degree of economic openness,foreign trade and foreign investment, stability of currency, the degree of financialmarket development, the degree of political and military development and the degreeof scientific and social development. After that, we intensively studied into therelationship between each currency and its16influencing factors by using the methodof the grey relational grade analysis.As the result indicates, economic degree and scientific research input are keyfactors influencing currency internationalization while the key factors affectingcurrency internationalization vary with the currency itself, and we are supposed togive concrete analysis to concrete problems regarding the situation of the country.With the spread of globalization, internationalization is not only reflected in economicregions but also political and social aspects, which in turn confirms the soft power andcomprehensive strength of the currency. In the last part of the paper, we mentioned thesimilarities and differences of RMB as a growing international currency andconcluded that the road is tortuous while the future is bright for RMB and we shouldfollow the rules of currency internationalization to promote the internationalization ofRMB more effectively.