Analysis On The Influence Of China’s Foreign Exchange Reserve Scale On RMB Internationalization

After the financial crisis,the U.S.has repeatedly implemented quantitative easing policies and the U.S.dollar has depreciated significantly,causing shocks to economies around the world.Therefore,in the context of economic globalization,it is crucial to build a diversified international monetary system.The internationalization of RMB is conducive to gradually transforming the dollar-centered international monetary system and promoting the formation of a diversified international monetary system.The internationalization of the RMB was officially launched in 2009 when China launched the pilot cross-border trade settlement in RMB,and the internationalization of the RMB has been steadily progressing for more than a decade.Now that China’s economy has entered a stage of high-quality development,China is striving to build a new pattern of all-round opening up,and RMB internationalization is developing rapidly.At the same time,China’s foreign exchange reserves have grown rapidly since its accession to the WTO and became the world’s largest in 2006.By 2022,China has maintained the world’s No.1 foreign exchange reserve size for 17 consecutive years.Research on the impact of foreign exchange reserve size on currency internationalization has received attention from academics,but the findings are inconsistent and there are fewer empirical studies specifically examining the impact of foreign exchange reserve size on RMB internationalization.Compared with most other countries and regions,China has a very large size of foreign exchange reserves.Since 2009,when the internationalization of the RMB officially took off,what impact has the very large size of foreign exchange reserves had on the internationalization of the RMB? What role has it played? It is important to explore this question to enrich the theoretical study of RMB internationalization from the perspective of foreign exchange reserves,which is of great practical significance to promote the development of RMB internationalization and build a diversified international monetary system.This paper first reviews the relevant literature on the scale of foreign exchange reserves and RMB internationalization,summarizes the measurement methods and influencing factors of RMB internationalization,and summarizes the research conclusions on the impact of foreign exchange reserves on currency internationalization,which provides reference for later theoretical research and empirical research.After that,it expounds the relevant theoretical basis of the scale of foreign exchange reserves and currency internationalization.Based on the theory,it analyzes how foreign exchange reserves affect currency internationalization from the perspectives of exchange rate stability,international balance of payments and international trade,which lays a theoretical foundation for the following empirical research.In addition,based on China ’s national conditions,this paper analyzes the current situation of the two,combs the development process and current situation of China ’s foreign exchange reserves and RMB internationalization,explores the changes and reasons of the two in different periods,analyzes the realistic relationship between the two,and puts forward the hypothesis that the scale of China ’s foreign exchange reserves has a positive impact on the internationalization of RMB.In the empirical part,this paper uses the generalized method of moments to estimate the quarterly data from 2009 to 2021,and uses the international bond share as a measure of the level of RMB internationalization.The multiple linear regression model including the core explanatory variable foreign exchange reserve scale and the basic factors affecting RMB internationalization(economic strength,monetary inertia,exchange rate level,inflation,interest rate difference,exchange rate volatility,financial market development degree)explores the impact of China ’s foreign exchange reserve scale on RMB internationalization and verifies the hypothesis.The empirical results show that the scale of China ’s foreign exchange reserves is conducive to the international development of the RMB,and in the case of the global new coronavirus epidemic,the two still show a significant positive impact.Based on this,this paper draws one of the conclusions that the scale of foreign exchange reserves has a significant positive impact on RMB internationalization.In addition,this paper also finds that the development level of financial market,economic strength and monetary inertia have a significant positive effect on the development of RMB internationalization.The appreciation of RMB exchange rate is an important driving force for the further deepening of RMB internationalization in the international market,but the impact is non-significant;the impact of the global epidemic has hindered the internationalization of the RMB.Then according to the research results,from the perspective of managing foreign exchange reserves,enhancing economic strength,and improving financial market development construction,relevant policy recommendations for the development of RMB internationalization are proposed.