The Effect Of Offshore Market Development On Currency Internationalization

After the 2008 global financial crisis the suggestion of the international monetary system reform become a hot issue of the global economy again. Both the Chinese economic power and the comprehensive national strength have leapt to the forefront of the world. The GDP surpassed Japan to become the second in the world. Import and export trade volume comes to the first place for three consecutive years since 2013.However, the international status of the RMB is a serious mismatch of the economic strength.The internationalization of RMB become inevitable trend. The concept of internationalization of the RMB is proposed earlier.But the real advance measures are taken after 2009.It has made progress greatly in more than five years, especially in the field of cross-border trade settlement. But considering of the current situation at home and abroad, the internationalization of the RMB is still facing great challenges and difficulties. Because China has not yet fully open capital account, offshore market has become an effective way to expand the amount of offshore RMB holdings. It provides a trading place and return channels for the outflow of the RMB.This paper elaborates the success of the U. S. dollar offshore market and the difficulties in the development of the yen offshore market by doing a lot of research about the U.S. dollar, Japanese yen and other offshore market. It preliminary draw the relationship between the development of offshore market and the internationalization of a country’s currency. This paper does an empirical analysis on the basis of the theoretical study. It summed up related data of seven major reserve currency and the BRICs currency and then established an econometric model to test. The empirical results show that the development of the offshore market has a positive role in promoting the internationalization of the currency. Based on the empirical results, combined with the status and encountered problems of the development of offshore RMB market, we continue to investigate the conditions of the development of the offshore market. What’s more, this paper gives full consideration to the impact of offshore market on the domestic financial market. On the basis of a comprehensive analysis of the relationship between the offshore market and the internationalization of the currency, related suggestions about the RMB internationalization and the development of the RMB offshore market are proposed.