How Much Is RMB Abroad And It’s Effect On RMB Exchange Rate

In recent years, China’s economy developed rapidly, international balance of payments surplus expanded gradually year by year, international standing in the world economy continues to improve, many countries and regions had seen RMB as a reserve currency. RMB internationalization process will continue to be promoted. Based on the trend of RMB internationalization and appreciation, we explore and analyze factors that affect the changes of RMB exchange rate. In 2005, China adopted a managed floating exchange rate regime, the reform of RMB exchange rate formation mechanism is pushing forward orderly. In June 2010, the Central People’s Bank of China stated that China would be based on the environment of the specific balance of payments situation and changes in the domestic and international economic situations. Continued to promote the reform of RMB exchange rate formation mechanism, the flexibility of RMB exchange rate was strengthened. Therefore, in this kind of situation, we can make it better to manage the RMB exchange rate effectively, only if we get clear direction and the extent of the various economic factors that affect the RMB exchange rate.This article is based on co-integration analysis to discuss the traditional economic factors that affect the exchange rate, and verify it by multiple linear regression analysis. Then we regard the foreign holdings of RMB as another factor, and added it to the model for analysis. The purpose is to observe whether the new factor has a great impact on the RMB exchange rate fluctuations or not.The result shows that: to some extent, foreign holdings of RMB affect the RMB exchange rate. Based on the model predictive analysis, the new model predicted better than the previous model, and the relative error decrease.