Research On The Interaction Between Hong Kong Offshore And Onshore RMB Exchange Rates

Hong Kong’s renminbi offshore market as an important deployment of RMB internationalization strategy, Which had made tremendous development in continuous progress of the RMB internationalization process In recent years. It has become the world’s largest offshore renminbi market. Hong Kong offshore renminbi foreign exchange market as the CNH spot fixing price of launch had becoming more and more mature in the continuing development. At the same time, market-oriented reform of RMB exchange rate formation mechanism was deepening and had undergone three major changes. The exchange rate flexibility had increased significantly. It is foreseeable that the linkage relationship between Hong Kong offshore foreign exchange market and the onshore foreign exchange market will be more closely, also may form the RMB exchange rate pricing would "sidelined others’ concerns. Therefore, The article from this perspective,take the Hong Kong’s offshore RMB foreign exchange market as the starting point to explore the price guide relations between Hong Kong’s renminbi offshore exchange rate and the onshore exchange rate. And analyzes the guide relationship changes when the reform of the RMB exchange rate formation mechanism at different stages.Firstly, the article describes the Hong Kong offshore RMB foreign exchange market and onshore foreign exchange market. Then Collate and summarize the theories and principles of mutual interaction of the two markets,And analyzes the impact of the above theories Hong Kong offshore and onshore foreign exchange market for mutual interaction; Then we discussed the joint presence of the main channels for the two markets, include cross-border trade channels, direct investment channels and financial market channels.Secondly, use the Granger causality test, impulse response and variance decomposition that based on VAR models to Empirical analysis the linkage of different exchange rate in the various stages. The main conclusion of the study show that on the spot market, CNY spot exchange rate at the four stages in this study have mastered RMB pricing power.But with the interaction between the two markets is gradually increased and the Hong Kong offshore marke will weaken the pricingpower mastered by onshore renminbi market. On the whole,in the forward market, At different stages, there is a correlation among the CNYDF,CNHDF and NDF. Price guidance function of three-month period and one month period of the CNYDF and NDF exchange rate relatively strong,price guidance function of six-month period and twelve-month period of the CNYDF and CNHDF exchange rate relatively strong.Also can be seen that with the Hong Kong offshore market development and continue to reform the RMB exchange rate formation mechanism, so that the original information superiority NDF has gradually weakened,but it still would impact the CNYDF and CNHDF exchange rate,and the influence of CNYDF and CNHDF to the NDF is gradually enhanced.Currently CNHDF can not completely replace the NDF, CNHDF and NDF will continue to maintain the coexistence in the Hong Kong forward foreign exchange market.Finally, based on the research findings and the actual situation making some suggestion to improve Hong Kong’s offshore RMB onshore exchange market and onshore exchange market.For Hong Kong offshore renminbi foreign exchange market,we need to accelerate the development of Hong Kong’s offshore RMB deliverable forward markets; broaden the RMB back channels; improve Hong Kong’s offshore market financial support security system,strengthen supervision and coordination of the onshore market. For onshore foreign exchange marke,we need to continue to deepen the reform of RMB exchange rate and market interest rates; gradual relax the control policy of onshore forward market transactions; actively promote the development of RMB foreign exchange derivatives market.