The Development Of RMB Offshore Financial Market Impact On Mainland Monetary Policy

Development of RMB offshore market is an important driving force of RMB internationalization,it is beneficial to promote market-oriented financial price formation,provide a reference for the development of China’s macroeconomic policies.It is reasonable to estimate the scale of offshore renminbi circulation and improve regulatory efficiency.With the construction of offshore market, China’s economy has begun to face tremendous pressure,for example the frequent cross-border capital flows, the inflow of hot money, hedge excess liquidity and so on.In this context, decision makers and academics began to worry that the rapid development of RMB offshore market will have impact on the domestic monetary and financial systems, especially in terms of monetary policy.There are two views,some scholars believe that the development of the offshore market will reduce the monetary authorities’ ability to control monetary aggregates,weaken the independence of monetary policy,interfere with domestic interest rate, increase the difficulty of domestic monetary policy.Some scholars believe that the offshore market development advantages outweigh the disadvantages, risks should not be exaggerated monetary policy within the offshore market, it should be a good grasp of the time window and actively promote the development of RMB offshore market of RMB internationalization.This problem will not only affect the development of offshore market direction, but also have an impact on the development process of internationalization of the RMB.On the basis of existing theories and literature, this paper is to explore the development of RMB offshore market have an impact on domestic monetary policy.This paper has five chapters. The first section is an introduction about the background of this paper, the article structure and the innovation of paper.The second chapter introduce the development of RMB offshore market.Focus on Hong Kong, London and Singapore RMB offshore market.The third chapter introduce theoretical analysis of the offshore market’s impact on monetary policy.First is the interest rate transmission mechanism,second is the exchange rate transmission mechanism,third is the analysis of the money supply.The fourth chapter selected Hong Kong’s RMB offshore market data to construct the model for empirical analysis.The fifth section is the conclusions and the policy recommendations.The empirical results show that with the development of Hong Kong’s RMB offshore market, cross-border arbitrage between the mainland and Hong Kong, the arbitrage behavior cause the cross-border capital flows, then influence the interest rates, exchange rates and money supply of mainland, Finally affect the effectiveness of monetary policy. Second, the development of Hong Kong’s RMB offshore market scale, The degree of RMB backflow of Hong Kong to the mainland are the important factors that affect mainland monetary policy. Third, now Hong Kong’s RMB offshore market is not mature and far from the the yen and the dollar offshore market development degree, and the channel of capital return from Hong Kong to the mainland is narrow. the development of Hong Kong’s RMB offshore market would not affect the monetary policy of mainland. Fourth, in the long run, as Hong Kong’s RMB offshore market scale expands, the channels of reflux mainland expand, Hong Kong’s RMB offshore market will have impact on the mainland monetary policy.On the basis of empirical research, the paper puts forward relevant policy recommendations.The firs point is promote the development of offshore RMB market, expand the capital pools of RMB offshore market, increase the variety of RMB products, improve the offshore market risk adjustment mechanism.Second Set up the supervision cooperation mechanism between onshore and offshore market,make RMB offshore market crisis management plans and strengthening the cooperation of the anti-money laundering. Strengthening the monitoring of cross-border RMB cash flow.Improving the ability of mainland on cross-border RMB cash flow adjustment, actively and steadily promote the reform of marketization of interest rate, exchange rate on the mainland.Make full use of the reversed transmission mechanism of the RMB offshore market to promote the marketization of interest rate, exchange rate on the mainland.To avoid because of different market interest rate and foreign exchange rate then impact on domestic monetary policy.