The Empirical Analysis Of The Impact Of RMB Offshore Arbitrage On Onshore Foreign Exchange Market

Since 2009,the RMB settlement of cross-border trade,cross-border RMB trade settlement amount is growing rapidly,and the total amount of RMB cross-border trade settlement in the proportion of the total China's foreign trade is increasing.The rapid development of cross-border RMB trade settlement also leads to the rapid development of the offshore renminbi market in Hongkong,expanding of the scale of the offshore RMB funds pool.Because the capital control China still exists,and there is a big difference in the trading mechanism and supervision mechanism and a certain degree of segmentation between the offshore and onshore market,making the long-term existence of the exchange differences and spreads significantly between the two market,that provides arbitrage the market conditions and space.Based on the analysis of the mechanism of RMB Offshore arbitrage and the influence mechanism of RMB Offshore arbitrage on China's onshore foreign exchange market,and the data from July 2011 to December 2016 were selected,and then Vector autoregressive model and DCC-GARCH model are established.The dissertation analyse the influence of short-term capital flows and spot exchange rate of RMB caused by RMB cross-border arbitrage behavior caused by the RMB spot rate spreads and Renminbi loan spreads between offshore market and onshore market and NDF in Hongkong.The dissertation of this paper show:(1)Cross border arbitrage based on offshore and onshore arbitrage space will have an impact on short-term cross-border capital flows,foreign exchange reserves increase and onshore RMB exchange rate;(2)Exchange rate spreads,the RMB interest rate spread in the two markets and the appreciation expectation of renminbi have dynamic impacts on the onshore foreign exchange market,but the effect are different;(3)The impact of the RMB exchange rate spreads and interest spreads on short-term cross-border capital flows and the onshore RMB exchange rate are more significant,but the effect of NDF on onshore foreign exchange market has weakened;(4)The difference of exchange rate and interest rate will have a certain volatility spillover effect on onshore CNY exchange rate,however,the volatility spillover effect of exchange rate difference is higher than the effect of interest rate difference.In order to cope with the adverse effects of arbitrage activities,effective countermeasures should be taken:Firstly,promoting the reform of RMB exchange rate formation mechanism;Secondly,promoting the construction of RMB offshore market;Thirdly,strengthening the supervision of short-term cross-border capital flows;Fourthly,steadily promote the reform of the domestic financial market.