A Study On The Influence Of Financial Development On The Cross-border RMB Settlement In Yunnan Province

Yunnan Province is one of the important provinces in southwest China.It borders Myanmar in the west and borders Laos and Vietnam in the south.It has a unique geographical advantage in the development of cross-border trade settlement of RMB.The border trade between Yunnan and Vietnam,Thailand,and Myanmar began to recover after the reform and opening up.By 2009,the renminbi has become the main settlement currency in Yunnan's border trade settlement.In June 2010,the State Council put 20 provinces(autonomous regions and municipalities),including Yunnan Province,in the scope of pilot RMB settlement of cross-border trade.The central bank jointly with some ministries issued “An Overall Plan of Building Comprehensive Reform Experimental Zones of Border Finance in Yunnan and Guangxi Zhuang Autonomous Region” on November 27,2013.To implement the plan,the Yunnan Provincial Government subsequently promulgated “the Implementation Opinion of Yunnan Provincial People's Government on Building a Comprehensive Reform Experimental Zone of Border Finance ”.From the perspective of financial development and cross-border RMB settlement,the Opinion put forward ten key tasks of comprehensive reform of border finance in Yunnan.Theoretically,the development of a country's financial market is one of the important factors affecting the selection of cross-border trade currency.It will affect cross-border trade settlement currencies by affecting the transaction costs of currencies,the risks of currency holding,and the heterogeneity of export commodities.The paper aims to explore the impact of financial development on the choice of currency in crossborder trade,and then put forward proposals to promote cross-border RMB settlement in Yunnan Province from the perspective of financial development.On the basis of the theory of currency selection in international trade,the paper first analyzes the influence mechanism of financial development on cross-border settlement currency,and combs the status quo of Yunnan's financial development and cross-border RMB settlement.By constructing Vector Autoregressive Model for Empirical Analysis,I conclude that the scale and efficiency of financial development can both positively prompt cross-border RMB settlement in Yunnan.However,the degree of influence is different: the contribution of financial development efficiency is greater,and financial development scale smaller.In the end,I put forward the suggestions of advancing crossborder RMB settlement from the aspects of improving the construction of Yunnan's financial system,promoting cross-border economic and financial cooperation in Yunnan Province,and gradually promoting the free exchange of capital account.