Analysis Of The Influence Of China’s Outward Foreign Direct Investment On Rmb Internationalization

Since 1978,China has been carrying out reform and opening up,reforming related fields and industries at home,opening up to foreign countries and embracing the new world.This policy has promoted China’s economic strength to rise sharply,its comprehensive national strength has increased rapidly,and its national economy has gradually improved.Moreover,China’s long-term economic growth rate has surprised most countries or regions in the global market.During this period,there have been many landmark times,such as the bursting of the US real estate stock market bubble in 2008.Leading to the outbreak of the global financial crisis,the influence and destructive power are great;In 2013,the Chinese government put forward the "the belt and road" initiative to encourage China to cooperate with countries along the route,and this policy and plan have also been well implemented;At the end of 2019,the outbreak of global epidemic in 2020 and other events provided a good opportunity to promote the internationalization of RMB in China.According to the experience of internationalization of other countries’ currencies,such as the US dollar,the euro and the pound,if a country or region wants to internationalize its currency,the necessary stage is to go through a long process of trade and investment.Nowadays,China is also in the stage of transforming from a big trading country to a strong investment country.The types of China’s foreign direct investment are constantly enriched,and the total amount is growing rapidly.The scale,level,level and income of Chinese enterprises’ "going out" are also constantly improving.During this period,the role of foreign direct investment can not be ignored,and it is likely to become a key driving force to promote the internationalization of RMB.Considering the current international environment and complex situation,RMB internationalization is also facing many challenges.How to deal with the challenges is an important issue of RMB internationalization at present,and now we can make use of the period when the scale and types of foreign direct investment are developing rapidly to lay a good foundation for RMB internationalization.This paper sorts out the relevant literatures about China’s foreign direct investment and RMB internationalization,and the conclusion shows that most scholars in China focus on one aspect,that is,there are more literatures focusing on China’s foreign direct investment,and there are fewer literatures about the relationship between them.The only literature shows that foreign direct investment can promote RMB internationalization under certain conditions,such as exchange rate stability,and then promote the process of RMB internationalization.With the faster and faster internationalization of RMB and the deeper integration with internationalization,it will also reduce the cost of China’s foreign direct investment to a certain extent,effectively reduce various potential risks of China’s foreign direct investment,thus promoting the development of foreign direct investment,and the two will form a positive cycle.Through the combination of theoretical exposition and empirical model,based on the relevant basic theories of RMB internationalization and foreign direct investment,this paper explores the theoretical and practical relationship between them.In the empirical analysis,this paper selects the quarterly data from 2012 to 2022 to establish a model,uses the OFDI at the end of the quarter as the independent variable of the model,and uses CRI to represent the level of RMB internationalization.Other control variables include financial market development indicators,exchange rate indicators and inflation indicators,as well as foreign trade scale and foreign direct investment.After a series of tests on the model,the following conclusions are obtained: every one percentage point increase in China’s foreign direct investment will increase the degree of RMB internationalization by about 0.3057,which has a significant impact.This empirical result also demonstrates the quantitative relationship between the two.The last part combines the general analysis and empirical analysis between the two and puts forward corresponding policy suggestions: firstly,give good guidance at the national level and put forward preferential foreign direct investment policies to attract Chinese enterprises to invest bravely abroad.In the process of settlement,RMB is used for settlement,and supporting financial policies are established to meet the foreign trade needs of enterprises,create favorable conditions for the development of foreign investment of enterprises,and stimulate the enthusiasm of enterprises for foreign investment.