The Research On The Offshore And Onshore Renminbi Arbitrage Activities And The Influence Factors Of Arbitrage Space

Nowadays,developing offshore Renminbi(RMB)market is a significant action of RMB internationalization strategy.With the continuous expansion of the scale of offshore financial markets,there are always two quotations for the RMB exchange rate on the offshore and onshore markets in the dual context that the capital account RMB has not yet realized the free convertibility and the exchange rate marketization reform has not completed.And the exchange rate spread between the two markets continued to fluctuate in both directions,which triggered the arbitrage of the RMB between the offshore and onshore markets.The existence of arbitrage activities will have an important impact on the stability of the RMB price,the ownership of RMB pricing right,China's foreign exchange reserves,and the process of RMB internationalization.Therefore,there are some risks in promoting the internationalization of the RMB through the development of the offshore RMB market.In order to enable us to understand arbitrage more timely and thoroughly,and understand the relationship between offshore and onshore exchange rates better,this paper selects the most representative offshore RMB market in Hong Kong to explore the market and policy background of arbitrage activities firstly.Secondly,it analyzes the internal driving factors and external conditions that affect the arbitrage activities.Thirdly,the paper tries to elaborate the operation mechanism of arbitrage activities and the change mode of arbitrage behavior when external conditions change.Finally,it explains the influence of arbitrage activities on currency market and monetary policy.In addition,this paper adopts the structural vector autoregressive(SVAR)model,uses the data from May 2014 to September 2018,and selects the appropriate variables to empirically analyze the factors affecting the arbitrage space.The empirical research results show that factors such as the amount of RMB deposits in Hong Kong,the deviation of Hong Kong's offshore market from the mainland market economy,foreign exchange reserves,and the dollar strength will have an important impact on the dimensions of the arbitrage space.And the arbitrage space can respond quickly to the impact of the above factors.At last,based on the research and empirical analysis results of the arbitrage activities,some suggestions are put forward on the arbitrage risk prevention,the development of the offshore RMB market,the reform of China's exchange rate system,and the promotion of RMB internationalization.