A Study On The Trade Factors Influencing China’s Cross-border Trade Settlement In RMB

In recent years, China has made great achievements in economic development, is becoming the world’s second largest economy and playing a pivotal role in the global economy. However, the international status of RMB does not match with China’s economic status. China is a large trading country and has a huge influence in the international market. But the usage of RMB in cross-border settlement is not so high. The economic crisis exposed the shortcomings of the current international monetary system. The voice of reforming the international monetary system is getting higher and higher. The international financial situation provides a good opportunity for China to participate in the international monetary system reform and the improvement of the RMB internationalization.As the first step of the internationalization of RMB, whether RMB settlement of cross-border trade can be well implemented will have a direct bearing on the progress of RMB internationalization. China began formal implementation RMB settlement of cross-border trade in 2009, which marks we have made substantial progress in the internationalization of RMB. By far, RMB settlement of cross-border trade has been implemented more than six years from the pilot cities to the whole country, settlement amount raising from the original 3.58 billion yuan to more than 60000 billion yuan. It has been carried out by our neighboring countries and region to all the countries in the world. We also built offshore RMB center and signed currency swap agreements with many countries, which are great achievements.Promoting cross-border trade in RMB is of great significance on China’s development. From the national level, promoting cross-border trade in RMB settlement can promote regional cooperation and integration, can ease the imbalance of international payments, increase imports and foreign direct investment. Also, it will help promote the internationalization of the RMB. From the enterprise level, promoting cross-border trade settlement in RMB enables enterprises to effectively avoid the risk of exchange rate fluctuations, reduce business costs, but also help banks to develop new business, expand business scope. However, in the process of the development it also shows overall small trade scale, payment imbalance and commodity structure imbalance those problems. RMB settlement of cross-border trade serves for our foreign trade so that trade factors have great influence on RMB settlement of cross-border trade. By a profound analysis of trade factors which affect RMB settlement of cross-border trade, the thesis will try to find out the cause to hinder the further development of cross-border RMB trade settlement, and put forward relevant suggestions to promote the development of cross-border RMB trade settlement.This thesis is divided into four parts to explain the issue in detail:First, it will sort and explain the theory of the choice of settlement currency in international trade systematically and find out the main factors which impact the choice of settlement currency. Second, this thesis will describe the current situation of cross-border trade settlement in RMB and summarize its four main features:1.small overall scale 2.commodity structure imbalance 3.gradually balanced payment structure; 4.unbalanced regional development. Third, based on the current situation and features of RMB cross-border trade settlement, this thesis will analyze the factors which impact the cross-border trade settlement in RMB from foreign trade commodity structure, regional structure of foreign trade and forms of commerce. Forth, through the analysis of these factors, we can get a conclusion as follows:the huge size of China’s foreign trade is the basis for the development of cross-border trade settlement in RMB. But according to the historical experience, the smaller share of the world trade has negative impact on China’s cross-border trade settlement in RMB. Though the structure of foreign trade commodity has been greatly improved, its competition is still very weak. Enterprises have little discourse power at international market, which is not good for cross-border trade settlement in RMB. The regional structure of foreign trade is beneficial to the cross-border trade settlement in RMB at our surrounding regions. While for the developed countries in Europe and America, the competitiveness of RMB settlement is still very weak. At last, combined with the analysis of the trade factors which affect cross-border trade settlement in RMB, we provide relevant suggestions:our country needs to continue to vigorously promote the development of foreign trade, improve enterprise innovation ability, increase the enterprise strength, improve the heterogeneity and the quality of its products and balance foreign trade areas and strengthen ties with the emerging markets.Compared to other scholars’ achievements, this paper’s innovations include:first, this paper reflect the new situation more accurately because it include 2014 cross-border trade in RMB settlement related data. Second, compared with the previous studies, this paper focus on the trade-related factors, and according to the analysis, the recommendations may be more targeted.Due to the limited of the relevant knowledge and ability, this paper still deficiency: the one is due to knowledge is limited, this paper did not establish a relevant model for analysis, so it cannot better illustrate the question. The other is due to consideration is not comprehensive, the proposals put forward cannot solve all the problems. These are expected to be improved in the future study and research.