A Research On The Construction Of RMB Internationalization Index

Starting from China admitted into the WTO in 2001,with the steady growth of China's economy and the deepening reform and development of the domestic financial market,China's economic power and the total volume of import and export trade have reached the front rank in the world.As a part of the international monetary system,RMB has been playing an important role in the international trade,international reserve investment and other fields.However,the position of RMB in the international monetary system does not match China's economic power.Studying the process of RMB internationalization and measuring its index can provide the theoretical and data basis for the future development of RMB internationalization,accelerate the pace of RMB internationalization more effectively.This paper studies and discusses RMB internationalization from two aspects: theoretical research and empirical analysis.First of all,this paper expounds the process of internationalization of RMB from 2001 to 2017 in three stages.In the theoretical aspect,we study the related theory of currency internationalization such as currency substitution theory,Mundellian Trilemma,and analyzes the influence of the RMB internationalization based on actual conditions of China.In terms of empirical research,this paper firstly constructs three partial indexes of RMB internationalization from three aspects,selecting the quarterly data from 2012 to 2017 to calculate the partial indexes during this period,and figures out the magnitude of different partial indexes' forces.Then,we choosing quarterly data from 2002 to 2017,classifies and analyzes 23 variables by principal component analysis and gives a model of RMB internationalization index.Calculating the RMB internationalization index from 2002 to 2017,we can get its trend,combining with the partial indexes in the same period,hoping to establish an index evaluation system of RMB internationalization.Besides that,this paper also makes horizontal and vertical comparisons of its indices to verify its robustness.Combined the theory with the empirical results,this paper concludes that RMB internationalization is still in a developing stage.In the past 16 years,its pace of development has changed with the external shocks and domestic economic variation.However,the continued depreciation of the RMB,causing the continuous outflow of domestic and foreign funds,and the tightening of Chinese capital account control.Consequently,RMB internationalization slows down.The findings of this paper believe that the biggest obstacle to RMB internationalization at present is the lack of confidence in RMB and the Chinese economy.The government should focus its policy on monetary stability in order to solve the current series of problems and allow the internationalization of the RMB to go further.