The Measurement Of The Degree Of RMB Internationalization

RMB Internationalization is the general and accelerating trend at present. Accurate judgment of the degree of RMB Internationalization is the basis for decision making, attracting much attention. This paper reviewed domestic and foreign literatures that related to the measurement of the degree of currency internationalization, and summarized the methods and indicators for measuring the degree of currency internationalization. Under the circumstance that the current researches either use individual indicators for unilateral measurement or the weighted average of multiple indicators in which each indicator is endowed the same weight, the following study should focus on how to give each indicator a reasonable weight so as to measure the degree of currency internationalization comprehensively.This paper summarized the internal and external factors which would influence the currency internationalization degree. On the basis of the existing relevant researches, this paper developed a model based on the principal components analysis to comprehensively measure the degree of currency internationalization and proposed the method to calculate the index of the degree of currency internationalization as well as the modified index of the degree of currency internationalization. For China’s specific situation, this paper analyzed the internal and external factors which would influence the degree of RMBInternationalization. It also analyzed the implementation of RMB as a medium of exchange, a unit of account and a store of value. These analyses preliminary judged the degree of RMB internationalization, making the foundations for the following measurements. In empirical analysis, it measures the degree of the internationalization of US Dollar, Euro, GBP and the Yen by using the model developed in this paper. Using the estimated weights of the indicators, it calculates the index of the degree of RMB internationalization and the modified index of the degree of RMB internationalization. Using the modified index as dependent variable, this paper also analyzed the influence of the internal factors on the main international currency’s internationalization degree and the influence on RMB internationalization degree by using a variety of measurement methods.Last but not least, on the basis of these studies, this paper gives the following policy recommendations on enhancing the degree of RMB internationalization. Firstly, keep the growth of international trade scale steady and strengthen cross-border RMB trade settlement. Secondly, promote the coordinated development of onshore and offshore markets. Thirdly, keep the liberalization of the capital account in harmony with the exchange rate and interest rate liberalization. Fourthly, increase the economic political and military power to enhance the comprehensive national power.