The Internationalization Of Rmb Under The Condition Of Legal Digital Currency

In recent years,the competition among multiple currencies in the international monetary system has intensified.With the strengthening of China’s comprehensive national power and international status,the RMB has become the preferred safe haven currency for many international market entities.The internationalization of RMB is also progressing.The advent of the digital economy has driven a shift in the form of currency to digitalization.Private digital currencies are emerging and their market prices fluctuate drastically.As China’s legal digital currency,e-CNY are beginning to attract attention.The e-CNY has an early-development advantage in research and development in the world.This will hopefully provide good prerequisites and development opportunities for the next stage of RMB internationalization.The internationalization of e-CNY has become one of the new forms of RMB internationalization in the era of digital economy.Therefore,it is important to explore the impact of e-CNY on the internationalization of RMB.This paper focuses on the e-CNY and the internationalization of RMB,and uses literature review,logical reasoning and empirical research to investigate the impact of the e-CNY as China’s legal digital currency on the internationalization of RMB.First,the concepts and literature review related to e-CNY and RMB internationalization are summarized.This will pave the way for the subsequent theoretical analysis and empirical research.Second,a theoretical analysis of the impact of digital RMB on the internationalization of RMB is conducted from two perspectives:direct effect and indirect effect.Then,according to the above analysis,a multiple regression model on the factors influencing RMB internationalization is established on the basis of monthly time series data from January 2012 to December 2021.Based on this,a structural breakpoint CHOW test is conducted on the level of RMB internationalization using January 2016(when the central bank announced its plan to issue e-CNY)as the time cut-off point,so as to investigate whether the level of RMB internationalization has changed structurally.After that,a dummy variable mixed model is built to reanalyze the structural changes that occurred,so as to investigate the specific forms of changes in the level of RMB internationalization before and after the announcement of the central bank’s plan to issue e-CNY.Finally,a vector autoregressive model(VAR)is developed.The impulse response and variance decomposition are used to dynamically analyze how the impact of each influencing factor on the internationalization of RMB changes over time.In particular,the dynamic effect of e-CNY on the RMB internationalization will be paid special attention.The main conclusions of this paper are as follows:(1)The e-CNY is expected to facilitate the RMB internationalization by extending basic functions of the currency,including the medium of exchange,the medium of payment,the unit of account and the store of value.At the same time,it indirectly contributes to the RMB internationalization through influencing factors such as economic scale,trade status,currency stability and financial market development.(2)The announcement of the central bank’s plan to issue e-CNY has greatly increased the expectations and confidence of international market entities in the RMB,thus influencing the internationalization of RMB.Before and after the announcement of the central bank’s plan to issue e-CNY,there was a clear structural change in the level of RMB internationalization.This change takes the form as follows:Trade status,external currency stability and financial market stability have a stronger promotion of RMB internationalization.The positive impact of economic scale and the depth of financial market development on the internationalization of RMB decreases slightly,while the negative impact of the internal currency stability represented by the inflation rate on the internationalization of RMB is moderated.(3)The positive impact of e-CNY on the RMB internationalization will persist for a long period of time,including a strong impact in the short term and a sustained impact in the long term.At the same time,there is a significant serial autocorrelation of RMB internationalization.It exhibits significant lagged effects and monetary inertia.The e-CNY can help to promote the RMB internationalization into a new stage and is expected to be one of the optimal paths to achieve a virtuous cycle and long-term development of the RMB internationalization.This paper makes the following recommendations:(1)Steadily promote the use of e-CNY in China and connect with mobile payment platforms to achieve rapid integration of e-CNY into daily life.(2)Actively carry out international cooperation and exchanges on the cross-border application of e-CNY to lay a good foundation for the large-scale global use of e-CNY.(3)Prioritize the use of e-CNY under existing regional economic and trade cooperation to provide diversified scenarios for the cross-border application of e-CNY.(4)Promote the use of e-CNY in Chinese Hong Kong,Singapore and other RMB offshore trading centers to provide a realistic basis for the internationalization of e-CNY.(5)Pay attention to the stabilizing role of foreign exchange reserves in the financial market after e-CNY is widely used,and keep the reasonable scale of foreign exchange reserves in line with the times.