Research On The Linkage Effect Between The Offshore RMB Market In Hong Kong And The Onshore Market

From a global perspective, the formation and development of offshore financial markets is an important symbol of the economic globalization, this process will not only bring fundamental changes to the onshore market, but also promote the development of the country’s currency as an international reserve currency. With the development of exchange rate market and the internationalization of the RMB, the RMB exchange rate will be determined by the supply and demand of the money market. Hong Kong offshore RMB market (CNH market) is the most important offshore RMB funds center, and the exchange rate linkage effect between it and onshore RMB market (CNY market), as well as Hong Kong non principal delivery foreign exchange forward market (NDF market), which will help us to clarify the linkage effect between offshore and onshore market, and finally realize the internationalization of RMB.In this paper, I use qualitative analysis and quantitative research methods to analyze and discuss the linkage effects and the conduction paths between the CNY market, the CNH market and the Hong Kong NDF market. First, this paper reviews the classic literature of the domestic and foreign research on the basis of a comprehensive review of the previous research results and deficiencies, and proposes their own writing innovation. Second, this paper introduces the development and the main types of the offshore market, and introduces the formation and development of the most important offshore RMB market in the world. Then the paper researches the formation and development of the CNH market and the Hong Kong NDF market deeply. Third, in-depth study of the internal transmission mechanism of the linkage between the CNY market and the CNH market, and mainly from the cross-border trade RMB settlement mechanism and the RMB circulation mechanism and so on. Fourth, from the two aspects, the paper elaborates on the theory that the foreign exchange market in China and abroad, which are the forward and spot, offshore and onshore. The empirical research in this paper mainly uses a variety of measurement methods, such as stationary test, cointegration test, Granger causality test, impulse response and variance decomposition to explore the long-term equilibrium relationship between the CNH market, the Hong Kong NDF market, and the CNY market. Fifth, based on empirical research results, this paper draws the following conclusions:At present, the pricing of RMB is still in the hands of the domestic market. But with the continuous improvement and development of the CNH market in Hong Kong, the linkage effect between the two markets will gradually enhanced. In view of the recent central bank "811 exchange reform", this paper analysis the performance of the market after the exchange rate reform, and put forward countermeasures to solve the exchange rate reform after the market movement. At the end of the paper, we put forward the policy recommendations to speed up the development of the CNH market to promote the internationalization of RMB, which mainly includes promoting the reform of the domestic financial system, promoting the construction of the offshore RMB market infrastructure, and improving the two-way circulation of RMB.