A Study On The Internationalization Of RMB And The Financial Reform In Shanghai Free Trade Zone

China has experienced continuous growth on international trade and increase in economic power. When the financial crisis occurred, the Chinese government seized this opportunity to initiate the internationalization of RMB in2009. After several years, the usage of RMB in the cross-border settlement under the current account has achieved some big progress.Under the new normal situation of China’s economic growth, the Chinese government set up the Shanghai Free Trade Zone (SHFTZ for short) to test a series of reform on the financial system. In this form, the Chinese government promoted the internationalization of RMB in a deeper level.This paper systematically collected all policies and detailed rules relating the financial reform published after the initiation of the SHFTZ. This paper made some summary about the reform based on these rules and data available, and analyzed the effect that the reform has on the internationalization of RMB, potential risk as well as some existing problems. At last, this paper make some recommendations.The conclusion of this paper are:①The internationalization level of RMB is still quite low, and mainly under the area of cross-border settlement.②The reform in SHFTZ mainly focus on expanding the usage of RMB in cross-border settlement, reforming the exchange rate formation mechanism, liberalizing interest rate, and opening capital account. Especially, the reform made some major breakthrough on releasing the control of capital, including areas such as controls on FDI, ODI, cross-border investment in equity securities and other asset. In this way, the reform accumulated a lot of experience for a deeper level of the RMB internationalization.③Accompany by many achievement, the reform also encountered many risks such as an erosion of the PBC’s monetary policy independence, shocks on the financial system and department of real economy in mainland China. Also, the reform has many problems such as an incompleteness of policy system, time lag of detailed rules of the reform and inharmonious practice of the specific government related to this reform.