Research On The RMB Offshore Market Impact On Domestic Monetary Policy In China

Since 2010,the offshore RMB market has achieved leaping development.The offshore RMB market is distributed all over the world such as Hongkong,London,Singapore and Taiwan,China.The development of RMB offshore market has promoted the process of RMB internationalization.With the continuous improvement of the status of China's big powers,the offshore RMB market has a milestone significance for the globalization of Chinese economy.However,many international experience shows that the development of offshore market will affect monetary policy of currency issuing countries to some extent,and weaken the effect of domestic monetary policy.Especially in recent years,the Hongkong RMB offshore market continues to expand the scale and RMB business becomes more and more.Current interest rate and exchange rate marketization in Chinese Mainland should be improved.Chinese government is carrying out a series of market-oriented reform of interest rate and exchange rate policy.Due to the jurisdiction from the monetary authorities,the degree of market economy In the offshore market is very deep.The price of RMB is different between territory and Hongkong offshore market,which leads to arbitrage funds flow between the onshore market andthe offshore market.Arbitrage can enliven financial market and promote the development of RMB business in the offshore market,but when arbitrage funds scale is too large,it will affect the supply of RMB exchange rate,interest rates and exchange rates in Chinese Mainland to a certain extent,thus affecting the effectiveness of monetary policy the central bank launched,weakening domestic currency policy.This paper analyzes the influence of the RMB offshore market on the domestic monetary policy from the theoretical analysis,the realistic analysis and the empirical analysis.In theory,this paper firstly introduces the offshore market and transmission mechanism of monetary policy,the definition and characteristics of interest rate and exchange rate transmission mechanism of monetary policy in the offshore market,then analyze the impact of the offshore market on domestic monetary policy from the money supply,interest rate and exchange rate.Analysis shows that the offshore market will have an impact on the domestic money supply,domestic interest rates and exchange rate.Then it selects the offshore RMB market in Hongkong,introduces its development process,and lists some examples of RMB business in Hongkong offshore market,and puts forward the possibility that Hongkong's offshore RMB market will have an impact on domestic money supply,interest rate and exchange rate.Based on the above analysis,we use MS-VAR model and Granger causality test to test the impact of Hongkong's offshore RMB market on domestic money supply,interest rate and exchange rate.The research results are as follows:at present,the offshore RMB market has some influence on the domestic monetary policy,but due to the limited scale of the offshore market development,the short-term negative impact is relatively small.