The Extreme Risk Spillover Between Onshore And Offshore RMB Interest Rates

With its expending circulation channel and scale,RMB’s cross-border circulation has become more frequent which intensify the influence of risk of the onshore and offshore RMB markets.The interest rate with the high sensitivity of the the cross-border flow of the RMB is bound to produce significant fluctuations.Hence,from the perspective of the interest rate,the article is going to analyze the impact of interest rate changes on the risk,especially the extreme risk,of both shores’ financial markets.The emergence of several extreme risk events has brought about great challenge to the stability of the financial system since the reform of the interest rate marketization,an d it’s the reason why that the study of the overflow effects of extreme risks is of great significance to the regulatory authorities.In order to study the existence of interaction for interest rate ma rket extreme risk between onshore and offshore,using the MVMQ-CAViaR model,through the empirical analysis,it is found that there is extreme risk spillover effect between the mutual fluctuation of short-term market interest rates between the onshore and offshore market interest rates,while there is only one-direction extreme risk spillover effect from onshore rate market to offshore rate market for the long-term.The current interest rate market curve formation mechanism in China is developing gradually,also the deposit loan interest rates has been completely cancelled.In the future it will gradually close to the free floating interest rates,which depict the rising level of internationalization of the RMB and the healthy development of the offshore market interest rates.But in the medium term,the size of offshore interbank lending and related policy restrictions still lead to the onshore with the dominant position,and the reaction of offshore market is not obvious.It shows that the interest rate marketization is still far from enough,we should continue to coordinate the development of derivatives,accelerate the capital projects,and enhance the liquidity.