Risk Management On Renminbi Internationalisation

During the decade after the involvement of WTO,China has achieved rapid economic development astonishing the rest of the world.Up till now,China plays a critical role in various international organisations including the World Bank,IMF as well as the Financial Stability Board.In order to accord the importance of China's sovereign currency Renminbi with China's economic development and make Renminbi serve the economic development of China more profoundly,Chinese government embarked Renminbi internationalization in 2009.Especially in 1st October 2016,the brand new Special Drawing Rights currency basket where Renminbi is first added will be carried out firmly which indicates that the internationalization of Renminbi stepped into next phase.To introduce the logical structure in a more detailed way,this paper first illustrates the meanings of Renminbi internationalization based on literature both foreign and domestic.The studies on the prerequisites,paths,risk and benefits of currency internationalization are introduced in the following part.Moreover,we analyse the impact of Renminbi internationalization on China's systemic stability of macro-economy,the independence of currency policy and other risks such as non-economic risks after illustration of the history as well as current development of Renminbi internationalization.Then the real data and model framework of macro-economy are combined in the empirical study where the degree of the openness of capital account is employed to represent the degree of Renminbi internationalization.Finally,based on the empirical evidence of the internationalization of other currencies such as US dollar,euro,sterling and Japanese Yen,several policy recommendations on the risk management during the process of Renminbi internationalization are proposed.These policy recommendations consist of gradually carrying out the convertibility of capital account,deepening the reform on financial system so as to manage the risk of foreign exchange rates,strengthening the reform on financial regulation especially the reform on macro-economic regulation in order to manage systemic risk,and reinforcing the role of Hong Kong as the major offshore Renminbi centre to manage the risk of currency competition.