Research On The Comparison Of The Currency Competitiveness Of RMB

Being the international currency not only can earn high seigniorage, make cross border trade more convenient,but also can enable a country join in the international market better which could promote the economic development and improve their own say in the international political and economic affairs. RMB is exploring a suitable road of internationalization. But there’s still a long way to be internationalization. This paper will focus on how wide disparities of currency competitiveness between RMB and other major currency in the world. We design a comprehensive evaluation index system of currency competitiveness to measure the gap between RMB and other major currency in the world, and then we will put forward the policy suggestions.At first, we introduce the main theory-the theory of currency choice which makes groundwork for the model construction after. On the basis of the theory of currency choice, we design the model and then test the independent variables making use of the panel data. Then we establish a comprehensive evaluation index system of currency competitiveness using principal component analysis which includes the measurement of the income level, the level of development of financial markets, the stability of currency, the value of currency and historical factors which is also the most important part of this paper. After that we make comparison analysis of the currency competitiveness of 2004 to 2013 of RMB and other major currency in the world, including dollar, euro, pound, yen, Australian dollar, Canadian dollar and Swiss Franc, using the evaluation index system of currency competitiveness we have established. We found that among these currencies, the currency competitiveness of dollar is far ahead. However, the currency competitiveness of RMB is not only below the average of these currencies, but also in the last two in the ranking. The currency competitiveness of RMB still lags far behind other currencies, especially dollar and euro which reflects in many aspects. At last, according to the empirical analysis above, we put forward some policy suggestions on how to enhance the currency competitiveness of RMB.