Macro-Finance Salon (No. 31): RMB Internationalization and Offshore Market Pricing

On May 8, Macro-Finance Salon (No.31) was held by IMI and the School of Finance of RUC. Chen Weidong, Director of International Finance Institute at Bank of China, was invited to give a keynote speech on RMB internationalization and offshore market pricing. Wei Benhua, former deputy administrator-in-Bureau of SAFE, attended the meeting and commented on the speech. The Salon was presided over by Zhao Xijun, the associate dean of the School of Finance at RUC. Dr. Chen Weidong stated, after the “8.11 reform”, RMB is facing 5 changes, including an enhancing fluctuation between onshore and offshore price, a descent in the share of international payment, a slowdown of bong issuance, an increase in the activity of foreign exchange transaction. He pointed out that the connotation of RMB’s internationalization is marketization, therefore, during its return to normal, RMB will experience the propelling of three factors: domestic economy, foreign trade and the growth in oversea investment, while facing a lot of uncertainties. In the long term, China keeps seeking the new drive of economic development while its enterprises are still lack of competiveness and there is a gap between the structure and depth of its financial market and the developed countries’. In the short term, the financial reform in China may trigger a risk; the change of market is converting people’s expectation; a great amount of foreign currencies is tended to be held; the carry trade in both domestic and oversea markets may cause negative influence. Judging from the processes and experiences of internationalization of USD, German Mark, Japanese yen, internationalization of currency is a tortuous process, in which RMB should maintain its characteristic as well as focus on the development of offshore market. During the internationalization of RMB, unsolved theoretical issues, offshore market pricing and the design of future developing path should all be taken in to account. Mr. Wei Benhua mentioned that the “8.11 reform” is just a momentary factor of the slowdown of RMB’s internationalization, of which the connation needs a deeper discussion. He reviewed the basic situation of the “7.21 reform” and the “8.11 reform” and pointed out the necessity of financial market’s reform. He hoped the attendants can give a consideration to those problems: What should the next step of the reform of exchange rate be? Whether will the internationalization of RMB be affected by the open of capital market? How to make use of the competiveness of Chinese enterprises? How to promote the development of offshore market? Prof. Zhao Xijun held that after the “8.11” reform, what lies behind the possible two-way fluctuation of RMB’s internationalization are the changes in the speed of economic growth and structure. He thought different viewpoints concerning the impact of RMB’s internationalization on exchange rate formation mechanism and open of capital account. In the Q&A session, Dr. Chen answered the questions regarding appreciation and two-way fluctuation of RMB, the driving engine of China’s economic development, the impact of RMB’s internationalization on banks, linkage between issuance of currency and the interest rate conducting system, way to make use of the internationalization of RMB.

DOWNLOAD