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Influence of RMB Cross-border Settlement on the Chinese Economy

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  • Qiyuan Xu
  • Fan He

Abstract

In 2014, the amount of RMB cross-border settlement had reached RMB7.6tn. It is important to evaluate the potential influence of RMB internationalization on China's macroeconomy. In the present study, a framework that includes monetary supply and demand was created to analyze the influences of RMB cross-border settlement on China's domestic interest rate, asset price and foreign exchange reserves. It is found that RMB settlement in different BOP items leads to very different effects on China's real economy and the financial market. Based on the analysis, we provide a framework of the policy priorities for RMB internationalization, with the RMB cross-border settlement items divided into three groups with different priorities. Meanwhile, to support RMB internationalization, exchange rate reforms should be adopted as a priority and a prudent attitude maintained regarding capital account liberalization.

Suggested Citation

  • Qiyuan Xu & Fan He, 2016. "Influence of RMB Cross-border Settlement on the Chinese Economy," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 24(1), pages 104-122, January.
    • Handle: RePEc:bla:chinae:v:24:y:2016:i:1:p:104-122
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    File URL: http://hdl.handle.net/10.1111/cwe.12146
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    References listed on IDEAS

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    1. Maurice Obstfeld & Jay C. Shambaugh & Alan M. Taylor, 2005. "The Trilemma in History: Tradeoffs Among Exchange Rates, Monetary Policies, and Capital Mobility," The Review of Economics and Statistics, MIT Press, vol. 87(3), pages 423-438, August.
    2. Chen-yuan Tung & Guo-chen Wang & Jason Yeh, 2012. "Renminbi Internationalization: Progress, Prospect and Comparison," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 20(5), pages 63-82, September.
    3. Ming Zhang, 2012. "Chinese Stylized Sterilization: The Cost‐sharing Mechanism and Financial Repression," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 20(2), pages 41-58, March.
    4. Bernardo B�tiz-Lazo, 2015. "The Society for Worldwide Interbank Financial Telecommunications (SWIFT): cooperative governance for network innovation, standards, and community," Business History, Taylor & Francis Journals, vol. 57(6), pages 945-947, September.
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    Cited by:

    1. Ming Zhang & Bin Zhang, 2017. "The Boom and Bust of the RMB's Internationalization: A Perspective from Cross-Border Arbitrage," Asian Economic Policy Review, Japan Center for Economic Research, vol. 12(2), pages 237-253, July.

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