The use of renminbi for trade and non-trade denomination and settlement

The use of renminbi for invoicing and settlement intermediaries in foreign-oriented activities is the first step and footstone of internationalization of the Chinese currency. With the appreciation of renminbi in recent years, there has been a growth of renminbi invoicing and settlement in China’s border trades, although the overall amount is small and the development momentum is imbalanced among different regions. The main obstacles come from such factors as VAT rebate policy restrictions and foreign exchange control, insufficient financial services, and under-cultivated willingness among enterprises. Looking from the strategic perspective of strengthening macro-adjustment and enhancing the open economy, it is pressing and would be beneficial to China to promote the renminbi’s invoicing and settlement function. Therefore, following the momentum, we should accelerate the construction of a cross-border renminbi clearing system, create non-discriminative treatment in terms of VAT rebate and exchange control policies, and gradually expand the usage of the renminbi from border trades to general trades and outward investment.

A geological and functional “three-step strategy” for renminbi's internationalization

Internationalization of the renminbi is the only option for China to fully integrate into the global economic and financial systems. It is not only necessary but imperative as well. With the discussion of advancing renminbi internationalization, benef its and costs must be addressed. We need to closely monitor possible risks and bring out the benefits while averting disadvantages. The overall strategy is to consolidate the groundwork and at the same time actively advance renminbi internationalization and opt for a "three-step" strategy at both strategic and policy levels. To overcome the constraints standing in the way of renminbi internationalization, the basic goals should be: to enhance the readiness of renminbi internationalization, dialectically assess the preconditions, and increase the currency's international circulation as a way to achieve major progress in renminbi internationalization.

Internationalization of the Renminbi:Status and Prospects

The recent global financial crisis has revealed great defects in the US dollar dominated international monetary system.In response,countries and international organizations have developed numerous proposals for reform of the system.With China's growing economic presence,the renminbi is gaining recognition and acceptance in international markets and is slowly beginning to play a significant role in trade settlement and offshore market development.Meanwhile,it is important to remain aware of the limitations of renminbi internationalization and the gaps that exist between it and other major world currencies.Once fully implemented,renminbi internationalization will result in it becoming a major currency on the world stage in approximately 15 years.

Volatility of the Exchange Rate after Renminbi Inclusion into the SDR：Test of Stability and Representation

The special drawing rights(SDR) must have stability and representation in order to serve as reserve assets and the unit of account for bulk commodities and assume the function as a potential international currency. By introducing such factors as China's share in global trade volume in 2013, this paper found that the covariance between the SDR and the price fluctuations of major commodities is the smallest after Renminbi inclusion into the SDR. The covariance is more or less halved compared with the SDR without Renminbi. Then, based on our comparison of volatility in the effective exchange rates(EER) of various countries(extensively used) and the volatility in the SDR exchange rate(seldom used), we found that despite similar trend curves, the SDR's volatility can explain for a very small part of the volatility in effective exchange rate. The residual error indicates that the share of SDR is limited in the volatility of effective exchange rates of various countries on the one hand and suggests that it is urgent to expand the SDR to include representative currencies, particularly the currencies that represent significant weights of world trade. Relevant tests demonstrate that Renminbi inclusion into the SDR will not only enlarge the stability of SDR but enlarge its function as an index currency through the extension of SDR's function as the unit of account for major world commodities and the inclusion of the currencies of other major trading nations, so that the representation as the global unit of account will be enlarged. In addition, the inclusion into the SDR also helps Renminbi become a component of the international reserve currencies and supplement its liquidity supply.

TRANSFORM THE MECHANISM OF RENMINBI’S EXCHANGE RATE SYSTEM IN CONFORMITY WITH THE DEMAND OF MARKET ECONOMY——The academic report delivered at the Annual Meeting of NNCIFS on October 1993

Exchange rate functions under systems of centrallyplanned economy and market economy are quite different,and the mechanism to determine such exchange rate is alsodifferent. To adopt a socialist market economic system inChina, the exchange rate mechanism of Renminbi must bethoroughly transformed. To accomplish this goal, I believethere are three problems that must be solved: first,

Renminbi internationalization lacks micro base

The current global financial crisis's severity is rarely seen once in a century. Due to a lack of liquidity-attracting new industries, the economic adjustment might be prolonged; and the multiplier effects of international finance and international trade call for joint rescue plans on a global basis. China's recent price adjustment has proven a failure and its domestic consumption-stimulating policy is ineffective. Investments and exports remain the growth engine for China's economy. So the country should make efforts to maintain export competitiveness with output adjustment, restoration of interest rate parity and reduction of the tax rate parity. Internationalization of the U.S. dollar-permeated renminbi is not a sensible choice, as the renminbi is not, in essence, an international currency, and it lacks a micro-foundation.

What are the Reasons for Keeping Renminbi Stable

Most of the economists agree that renminbi is undervalued, while as for how much it should be appreciated, substantial disagreements exists. At the beginning of this year, analysts abroad tended to think that the renminbi should increase its value by 10% to 15%. The most recent estimates are that the renminbi should appreciate 20% to 30%. This shows the great upward pressure on the renminbi. Since it was devalued in 1994, China’s currency has been kept at a constant nominal level to the US dollar despite china’s rapid economic growth, rising productivity, strong exports, and massive foreign direct investments——all factors that normally cause a currency to appreciated, moreover, the resulting build-up of central bank foreign reserves in itself is sufficient to justify renminbi appreciation. The reasons for keeping Renminbi stable is discussed in this paper.

Can the Chinese domestic bond and stock markets facilitate a globalising renminbi?

A global renminbi(RMB)needs to be backed by a large,deep and liquid RMB market with a world-class Chinese government bond(CGB)market as its core.It also needs the support from a bigger and more open domestic stock market.China’s CGB market is the sixth largest local currency sovereign bond market in the world.By transforming the non-tradable,captive central bank liabilities into homogeneous and tradable CGBs through cutting the still high Chinese reserve requirements by 1/3,the size of the CGB market can rise by 40%,boosting market liquidity while trimming distortions to the banking system.Also,policy bank bonds may attract foreign investor demand.Finally,a bigger and more open domestic A-share stock market also helps expand the RMB assets in the international investor portfolio.With both bigger bond and stock markets and their higher foreign ownerships following market opening,the combined sum of Chinese domestic bonds and A-shares held by foreign investors may increase five folds during 2018–2025,lifting the RMB asset position in global investor portfolios,facilitating a potential global RMB,while promoting a deeper and more efficient Chinese domestic capital market.This process of liberalising cross-border portfolio capital flows for non-resident investors may bring both risks and benefits to the Chinese economy.

Renminbi Derivatives: Recent Development and Issues

This study reviews the developments in markets. The onshore market has seen a the onshore and offshore renminbi derivatives rapid build-up in the market infrastructure and price discovery mechanism in the past year, with empirical evidence suggesting that its pricing is increasingly determined by financial fundamentals, such as the covered interest rate parity. However, the growth of the market has been restrained by restrictions on the participant base, limited variations in the RMB/US$ exchange rate, market participants＇ lack of technical capacity and experience, and inadequate supporting financial market infrastructure. The non-deliverable forward （NDF） market, concentrated in Hong Kong and Singapore, is more developed, but has the drawback that its pricing is not tied to financial fundamentals. The comparison between onshore and offshore markets suggests that two issues are of particular importance for future derivatives market development in China： the balance between regulation and development, and the relationship between onshore and offshore markets.

Chinese Renminbi Arrival in the ＂Tripolar＂ Global Monetary Regime

Since the financial crisis hit in 2007, the US dollar privilege has not only become ＂exorbitant＂ but ＂extortianate. ＂ Countries such as China are no longer willing to allow the USA to exercise this extortionate behavior. The potential geopolitical implications of a US dollar decline are immense. The USA would lose its privileged seigniorage position and with that the ability to achieve permanently higher returns on foreign assets than the returns paid to foreigners who invest in the USA. The global economy is already close to operating with three regional exchange rate anchors： the US dollar; the euro; and, increasingly, the renminbi. Hence, the transition to a tripolar system could occur sooner than many assert. Nevertheless, given the importance of financial deepening and integration in the internationalization of currencies, any shift will still be gradual.

Geographic Spread of Currency Trading:The Renminbi and Other Emerging Market Currencies

This paper studies the ongoing diffusion of renminbi (RMB) trading across the globe, the first of such research of an international currency. It analyses the distribution in offshore RMB trading in 2013 and 2016 using comprehensive data from the Triennial Central Bank Survey of foreign exchange markets. In 2013, Asian centers favored by the policy of RMB internationalization had disproportionate shares in global RMB trading. Over the following three years, RMB trading seemed to converge to the spatial pattern of all currencies, with a half-life of seven to eight years. The previously most traded emerging market currency, the Mexican peso, shows a similar pattern, although it is converging to the global norm more slowly. Three other emerging market currencies show a qualitatively similar evolution in the geography of their offshore trading. Overall, the RMB's internationalization is tracing an arc from the influence of administrative measures to the working of market forces.

人民币原油期货国际地位研究——基于多元传递熵的复杂网络分析

近年来原油期货计价货币由美元垄断转向逐渐出现多元化的趋势,为了科学评估上期所人民币原油期货(SC原油)在国际原油期货市场中的地位,本文通过基于多元传递熵的信息溢出网络分析,构建国际原油期货市场信息溢出网络,检验原油期货市场的重要性。实证证据显示,孟买、东京等非美元原油期货市场有较大的信息溢出,与美元原油市场存在显著的独特信息溢出关系,但SC原油的独特信息溢出不显著。与其他非美元原油期货不同,SC原油与人民币汇率之间没有显著的独特信息溢出关系,揭示原油期货市场与外汇市场之间的信息传递较弱。本文的发现对人民币国际化发展带来启示,应加强人民币在多元化的国际货币体系中的作用,加快人民币原油期货市场发展,进一步完善人民币汇率衍生品市场,与人民币原油市场实现协同发展。

Comparison of Vacuum Metal Deposition and 1,2-lndandione/Ninhydrin Reagent Method for the Development of Fingerprints on Renminbi

It is extremely difficult to develop fingerprints from the surface of currency.There are studies reporting that the high vacuum metal deposition(VMD)method can be used to detect fingerprints on certain types of currency notes.Both VMD and 1,2-indandione/ninhydrin techniques are employed to visualize latent fingermarks on porous surfaces,such as paper.The current study explores whether the VMD method or 1,2-indandione/ninhydrin reagent method is more effective in the development of fingerprints on remninbi(RMB).Uncirculated,circulated,and water-exposed RMB was utilized in this study,along with five donors who ranged in their age and potential to leave fingermarks.Samples were aged for a determined period(for uncirculated and circulated RMB,times were 1,3,5,10,and 35 days;for watei^exposed RMB,exposure time was 1 day)and then treated with VMD and 1,2-indandione/ninhydrin.The results suggested that the 1,2-indandione/ninhydrin reagent yielded a better effect for both circulated and uncirculated RMB.For the RMB exposed to water,VMD performed better and gave limited results in terms of fingerprint development,which could serve as a reference for actual forensic cases.

英国脱欧对不同经济体的影响研究

本文以英国脱欧这一重大国际事件为议题,回顾历史,展望未来,聚焦经济领域,深入研究英国脱欧在经济全球化中对不同经济体的影响。全文分为四个部分,第一部分介绍了英国脱欧对其自身经贸短期弊大于利、长期有着积极的影响;第二部分阐述了英国脱欧对欧盟国家在货币、金融、劳动力等方面产生的冲击;第三部分分析了英国脱欧对中国经济带来的阻碍和新的机遇;第四部分提出了对中英关系在金融领域、全球治理和科技领域开展多元化互惠互利合作的建议,以供参考。

Renminbi Nominal Effective Exchange Rate for Third Market Competition:An Approach Based on Disaggregated Trade Data

When measuring the nominal effective exchange rate （NEER）, three factors should be considered： direct import competition, direct export competition and third market competuion. The traditional NEER methodology using aggregated export trade data underestimates the competition between countries producing homogeneous goods, so that the weight of the effective exchange rates is too reliant on trade scale. Based on 2002 6-digit items of the Harmonized Commodity Description and Coding System, this paper employs the competitive stress index to adjust the weighting system of the renminbi NEER for third market competition. In the new weighting system, European countries and some emerging economies have higher weights compared with some of the developed countries, including the USA, Japan and resources-dominated eeonomies~ This research will facilitate the understanding of changes in China＇s export competitiveness.

Renminbi Appreciation and China's Industrial Upgrading

To identify the macroeconomic environment that has enabled China's industrial upgrading during a period of persistent renminbi appreciation,we construct a two-country New Keynesian model of industrial upgrading with a global production network,endogenous firm entry,and a directed quality frontier.We show that renminbi appreciation promotes industrial upgrading without hurting real economic growth in the longer run.This holds true especially through four channels.First,the quality threshold for firm entry is lower to allow for more firms participation and thus greater product varieties(quality threshold channel).Second,upstream skill-based production uses more imported inputs of higher quality(imported input channel).Third,there is substantial global demand towards the exports of high-quality inputs(global demand channel).Fourth,domestic inputs are competing against imported inputs to broaden the scope for competition in the upstream product market to incentivize quality upgrading(scope for competition channel).