Regional Influence Research Based On Renminbi International Use

After the collapse of the Bretton Woods system, the volalitiy of global financial market became frequently, which exposed some drawbacks of the original international monetary system. Meanwhile, with sustained and healthy development, China has grown into the world’s second largest economy. Considering both domestic and international factors, the international use of renminbi (RMB) has been put on the agenda. Since the launch of exchange rate formation mechanism reform in 2005, RMB has gone through last decade with challenges and opportunities of international use.The paper reviewed the definition of International Monetary and Optimal Currency Area theory with the experience of yen’s international use first. And furthermore, summarized the research of RMB international use and regional influence. Then the paper analyzed the role and the situation of RMB as well as its international use and regional influence, focusing on cross-border trade and offshore market.In order to better characterize the international use of RMB and regional influence, the paper established 135 countries/regions outside "anchor currency" model with collecting data in the international foreign exchange market, using offshore renminbi exchange rate as the main indicator from 2005 to 2015. The empirical results showed RMB regional influence in 2010-2015 was significantly higher than 2005-2008, and had been obtained a certain degree of influence in a given area, although still primary. Panel data also supported this conclusion. Based on empirical results the paper explored the influence factors of RMB regional influence, and found that the higher degree of bilateral trade, the stronger of influence. The relative distance and the establishment of offshore market also play important roles.The paper believed that RMB international use has been made fruitful in recent years. We should expand cross-border trade with RMB settlement, combined with the construction of offshore markets, domestic financial markets and macro-prudential policy frameworks so as to promote renminbi international use.