Research On The Interaction Between RMB Internationalization,Capital Account Opening And China’s Foreign Exchange Market Pressure

Since the outbreak of the international financial crisis in 2008,the world economic landscape has undergone profound changes and adjustments.Under the impact of the COVID-19,the world economy has presented a new situation of more complexity,diversity and change.In the face of a complex and severe internal and external environment,the Chinese government adheres to the steady and cautious promotion of RMB internationalization and the gradual opening of the capital account,and has made positive progress.Regarding the relationship between the two,on the one hand,the acceleration of the internationalization process of the RMB will further expand the opening of the capital account,and on the other hand,the opening of the capital account can also promote the internationalization process of the RMB,which is conducive to economic growth and long-term stability of domestic finance.While steadily promoting the internationalization of the RMB and gradually opening up the capital account,the Chinese government has also noticed the potential foreign exchange market risks behind both.Therefore,it is of great theoretical and practical significance to systematically study the dynamic and time-varying relationship between RMB internationalization,capital account opening,and the pressure on China’s foreign exchange market.Based on a comprehensive review of the historical process of RMB internationalization and capital account opening,as well as an analysis of their current situation,this article takes the scale of overseas RMB deposits,the openness of mixed capital accounts,and the foreign exchange market pressure without interest rate differentials as endogenous variables,analyzes the HP filtering trend,posterior volatility,and contemporaneous correlation coefficient of each variable,and constructs a three variable time-varying parameter vector autoregressive model on this basis,This paper empirically analyzes the dynamic time-varying relationship between RMB internationalization,capital account liberalization and China’s foreign exchange market pressure and conducts a robustness test.The research results indicate that,firstly,the internationalization of the RMB and the opening of the capital account are mutually causal in the short term.Secondly,forcefully promoting the internationalization of the RMB and forcing the opening of the capital account will have adverse effects,but expanding the opening of the capital account can effectively open up the process of RMB internationalization.Thirdly,the opening of the capital account is the foundation and prerequisite for the steady progress of RMB internationalization,and RMB internationalization is a condition and opportunity for further expanding the opening of the capital account.Fourthly,when facing significant foreign exchange market pressure,monetary authorities will appropriately slow down the internationalization process of the RMB to prevent the pressure in China’s foreign exchange market from rising too quickly.In view of this,this article proposes that: firstly,the Chinese government should reasonably arrange the path of capital account opening and RMB internationalization.Secondly,real-time monitoring of abnormal short-term capital flows to prevent foreign exchange market risks.Thirdly,accelerate the construction of domestic financial markets and achieve the deepening and broadening of financial markets.Fourthly,we will continue to promote the reform of the RMB exchange rate formation mechanism and improve the managed floating exchange rate system.Fifth,continue to promote the high-level opening up of the financial industry to the outside world and build a corresponding risk prevention and control system.