Academic journal article Canadian Social Science

Limiting Factors and Measures for RMB Cross-Border Trade Settlement

Academic journal article Canadian Social Science

Limiting Factors and Measures for RMB Cross-Border Trade Settlement

Article excerpt

Abstract

If the simultaneous development of cross-border trade and offshore market expanses radically, it will bring about opposite effects. We need to dialectically view the various influences brought by the development of cross-border RMB trade settlement and RMB internationalization. We need to start from the crux of our own shortcomings to improve the economic and financial system construction. We should seize the current favorable time, take advantage of the economic restructuring period of domestic market, the adjustment time of international offshore financial center, the period that international markets are seeking for haven currency and other historical opportunities to promote RMB internationalization by building RMB offshore markets.

Key words: RMB; Cross-border trade; Settlement

INTRODUCTION

Cross-border trade settlement is a very effective breakthrough to promote the internationalization of RMB. However, in the face of China's current synchronous developmental mode of "cross-border trade" and "offshore market", we cannot help thinking that what kind of relationship in the end exists between it and the internationalization of RMB? Whether this model can help achieve the internationalization of RMB? What factors limit the RMB cross-border trade and what measures should be taken to promote the RMB cross-border trade?

1. CONSTRAINTS OF THE RMB CROSS-BORDER TRADE SETTLEMENT

After the 2008 global economic crisis, many domestic experts and scholars believe that RMB should use the US dollar weakness in the post crisis period to accelerate the internationalization process and enhance the international status and recognition. The Chinese government also timely expanded the RMB cross-border trade settlement trials, and obtained a certain economic benefits through the valuation and settlement of cross-border trade. The reason why the Chinese government did not adopt a radical approach to promote the internationalization of RMB is mainly based on the following considerations:

Firstly, the restriction of China's monetary policy. At present, China follows an independent monetary policy, managed floating exchange rate policy and partial openness of capital accounts, but the achievement of RMB internationalization requires to under the premise of ensuring the independence of China's monetary policy to open the capital accounts or fully liberalize the exchange controls to fully implement floating. In the economic crisis, the depression of the U.S. Economy quickly infected Europe and emerging economies, the liberalization of exchange rate or capital control at this time would have caused a loss which would fully offset or outweigh the gains arising from the internationalization of RMB. Meanwhile, China's serious lag in financial regulation and undeveloped financial market makes it almost impossible to bear the risk of price volatility.

Secondly, the restrictions on China's economic self-development. Instead of saying that the economic crisis was caused by enormous negative external stimuli, making the Chinese economy into a recession interval, the exposed structural disequilibrium of Chinese economy is the root cause of the low resistance and resilience. Today, the Chinese economy is still under the shackle of "dual economy", rural and urban productivities develop unequally, and inter-regional economies present a nonequilibrium situation. Especially after the implementation of the large-scale counter-cyclical macroeconomic policy, the overcapacity, local debt accumulation, economic imbalance and other issues have been highlighted, making negative effects of the policy continued to expand. It is said that "resisting foreign aggression after stabilizing the country". In the face of its own complex economic situation, China has to speed up the industrial restructuring and upgrading, revive the real economy and allow the market to play a greater effectiveness in guarding against the external attacks of a variety of possible risks. …

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