The Effect Of Capital Account Opening On The Internationalization Of Rmb And Its Countermeasures

The connection between China and the world economy gradually deepened since the reform and opening-up policy. As China’s economic strength is growing and the rising influence of Ren Min Bi(RMB), the internationalization of RMB has become an inevitable trend which is more and more important for the formation of China’s economic development and China’s world position. China is a country transited from the planned economy system to the market economic system. In all aspects of the economy, especially in capital outflows and inflows, there still exists comparative strict control. Some scholars suggested accordingly that the capital account control have impeded the process of RMB internationalization, it needs progressive opening.Some scholars argued that the capital account control is still necessary in China’s current regulation. China constantly takes efforts in recent years to promote the internationalization of the RMB. Promote the internationalization of the RMB by opening capital account is very important. Through research the influence of open capital account on currency internationalization, this essay puts forward the suggestion of China’s capital account liberalization policy to promote the internationalization of the RMB.In order to study the effect of capital account liberalization for RMB internationalization, first we need to understand the relationship between them.Understand China’s development degree through historical clues and the Chinese government’ attitude and change of policy on these two aspects is helpful to conclude an objective explanation. Meanwhile, it can also be a basis of the policy we put forward. This article describes the development and the present situation and characteristics of them respectively. The starting point of capital account liberalization is in 1978. Before the reform and opening-up policy, China adopted the planned economy. The starting point of RMB internationalization is 1994 when China implements exchange and axle system reform, and the beginning of conditional RMB current account convertibility. After summarizing and analyzing the domestic situation, this essay will concluded that capital account liberalization is the key factorto promote a country’s currency internationalization by analyzing the United States,Japan, Germany’s open capital account and monetary international relations. The effective circulation of capital will increase people’s confidence in the currency, thus raise the proportion of currency, settlement and the proportion of the reserve currency.In order to validate and support normative analysis, we did empirical analysis of the internationalization factors of world’s five major currencies Dollar, Pound, Yen,Swiss Franc and the Euro. To observe the effects of capital account liberalization for monetary internationalization through is setting up panel data model. To reflect the openness of capital account through comprehensively describes the three variables of net value of the inward direct investment, net foreign direct investment, stock equity inflows. Found in the measurement that individual effect is very obvious which indicates that the influence of open capital has its characteristics for different countries. We should make judgment and choice of opening capital account according to the characteristics of China’s economic development.This paper argues that China should increase the approval rate and countries of QFII, QDII, RDFII and other capital account transition policies, following a step-by-step, overall planning and strict regulation principle. Meanwhile, in order to avoid the risk of currency mismatch, the onshore market needs to be developed and improved to better coordinate with offshore market. Regulate the qualification of direct investment while expanding investment scope. The risk of Capital Account Liberalization largely depends on the degree of financial market development.Therefore, the perfection of financial market regulation is critical to avoid the turbulence brought by capital account liberalization. In addition to internal reform,China should also actively seek external collaboration, strengthen cooperation with neighboring countries, thereby enhance the bargaining and pricing power, and further deepen the internationalization degree of RMB.