Case Study On The Strategy Of RMB Internationalization Based On The New Triffin Delimma

In recent years, with the rapid development of China's economy,China's comprehensive national strength has increased significantly, and our international status has been increasing too. Therefore,RMB plays a more and more important role in the international financial system. At the same time, the Chinese government has shown a high sense of responsibility in several financial crises in recent years, which has gained widely international recognition,making a loud voice for the internationalization of RMB. The critical ability of international monetary system has been highlighted by the global financial crises, so its reliability has suffered a strong concern, which also offers a rare historical opportunity for the internationalization of RMB. Therefore, it is very important to study the problem of RMB internationalization.There are two views towards the internationalization of RMB currently: one thinks that dollar will be replaced by RMB; and the other one believes that the internationalization of RMB should not mean to replace dollar but to become one of the international currencies,which is also supported by this paper. When it comes to the internationalization of a currency, all the sovereignty will face the Triffin Dilemma.There are several ways to solve this problem: the first way is to reuse the gold standard;the second way is to use the SDR of the non-sovereignty's currency as the international currency; and the third way is to increase the number of international currency for the currency diversification. We need to consider some nature factors such as reserves and distribution of gold if deciding to reuse the gold standard, and we also need to consider some economic factors, which shows that this method is unavailable. As for the second way, there is no economic support for the SDR, and it is not the actual currency too,which makes it difficult to trust its credibility, so SDR can not bear a role of a world currency. Therefore, it is only the third way that can be carried out,that is,to increase the number of international currencies so as to diversify the international currencies. Since China is an economic power and a responsible country, the goal of RMB internationalization should be to become a member of the international currencies, but not to be a substitute for the dollar.During the global financial crises, there was a shortage of the international liquidity,and many problems of the international monetary system has been highlighted too, so the previous "Triffin Dilemma" returned to the public's eyes again. In the Revived Bretton Woods System, dollar dominates the asymmetric center position in the international monetary system, maintaining a balance of international payments deficit, providing international reserves to other countries, and being the final export market for the whole world outside the United States, so other countries peg their currencies to the dollar.Emerging countries have accumulated huge currency reserves in the first 10 years of the 21 Century, and they found a self-protective method to deal with the risk of currency liquidity. They regard their huge reserves as precautionary reserves, but if the central banks and other reserve managers in emerging market (such as Sovereign Wealth Funds)continue to support the dollar and a small part of reserve currencies in other developed markets, their reserved assets will not be so safe gradually. This is similar to the well-known Triffin Dilemma described by Professor Triffin in 1960, so the Triffin Dilemma still exists in the current system. It is also the source of the instability of international monetary system and international economic and financial system. If RMB wants to replace the dollar, it should transfer the liquidity to the whole world, and it will face the problem that dollar has faced. Therefore, the internationalization of RMB is not aimed at replacing the dollar, but becoming a member of the international currencies.This paper puts forward the targeted localization of the internationalization of RMB based on the new Trffin Dilemma as an example. Four parts are included:The first part is the introduction, which puts forward the problems that will be discussed in the paper,and summarizes the related researching literature. It shows the basic structure of the full text.The second part is the introduction of examples. It introduces the New Triffin Dilemma as a case, which refers that since the international reserves are mainly made up by the debt of American government, the share of dollar in the global economy has been shrinking, and the United States will gradually lose its own financial capacity to meet the international needs of liquidity. Therefore, there is a dilemma between the expectation to meet the global demands for liquidity and the goal to maintain their own debt security:the proportion between their governmental debt and their GDP has been grown for a long time, while this proportion should be stable in order to maintain their own debt security.The third part is the analysis of cases. This paper analyzes and illustrates the three solutions of the Triffin Dilemma, which are the reusing of the gold standard, using the SDR of a non-sovereignty's currency as the international currency, and the international currency diversification.The fourth part is the conclusion and suggestions. We draws our conclusions mainly by the case analysis. Both of the Triffin Dilemma and the new Triffin Dilemma show that single currency will lead to Triffin Dilemma, so we suggests that RMB should become a member of the international currencies to share the responsibility of the Triffin Dilemma.