Objective Requirements For The Early Stage Of RMB Internationalization: Limited Capital Account And Directional Opening

We can start from the objective needs analysis of overseas international currency holders and discuss how to open China's capital account.

First of all, to act as an international currency requires that the currency have a strong material base and a stable purchasing power. The holder can be used to freely choose various commodities. The two is to strive to realize the valuation function of this currency in international commodity trading.

Second, the international currency also requires users to enjoy convenient and lower paction costs in trade, investment and various pactions.

Therefore, not only is commodity trading generally priced and settled in this currency, but the market for assets and liabilities denominated in this currency is more developed. The more developed the financial services, the more popular the currency is.

Therefore, a policy decision currently facing the Chinese government is to encourage more international financial centers such as Chinese enterprises, financial institutions, China, Hongkong and London to develop overseas RMB market, or to allow more foreign capital to enter the domestic market.

Obviously, the Chinese government should choose the former, encourage more Chinese enterprises and financial institutions to internationalize their operations, promote RMB valuation in overseas markets by going out, rapidly develop overseas RMB financial businesses, and encourage Australia, Singapore and the euro area financial development center to develop offshore RMB offshore market.

In contrast, domestic capital markets should still adhere to limited and directional openness.

It is mainly based on two points: first, opening up the capital market at an early stage is not conducive to the realization of the lowest goal and the highest goal of RMB internationalization.

We believe that the minimum goal of RMB internationalization is RMB valuation of overseas commodities and financial market pactions. The highest goal is to promote China to become a global bank to achieve high profit margin through effective resource allocation for the development of global real economy. Second, the opening condition of capital account is not yet ripe.

My understanding of the opening conditions of capital account is: (1) to choose the period of relatively narrow arbitrage space at home and abroad, in order to avoid the impact of large-scale hot money flow.

(2) there is no serious distortion in the domestic financial market, and the financing channels leading to the industry are very smooth.

(3) follow the order of macroeconomic and financial stability, interest rate liberalization, exchange rate flexibility and capital account liberalization.

None of these conditions exist at present.

The limited opening of capital account is mainly to relax the market access of the financial services industry and the indirect opening of the capital market with eligibility requirements.

First, it is necessary to promote two-way opening to the inside and outside sectors of the modern service industry including the financial services industry through pre admission national treatment, which is conducive to China's industrial upgrading and industrial restructuring.

At present, it is necessary to accelerate the opening up to the inside and outside the financial industry and other modern service industries which are in the state of administrative monopoly for a long time.

In these areas, the implementation of pre admission national treatment, the introduction of more foreign capital and private capital can promote the effective competition and healthy development of the service industry market.

Second, considering the unstable nature of international monetary and financial markets, it is still necessary to implement the qualification requirements for market access in the form of QFII and RQFII.

Not yet internationalized, corporate and financial institutions

Financial and foreign exchange risk management tools and markets are scarce. Therefore, financial markets will need to be opened up gradually, giving priority to introducing central banks and prudent operating financial institutions in the money market and government bond market.

Finally, use for reference.

The experience of bilateral investment treaty negotiations is to implement conditional orientation and liberalization of capital accounts.

The bilateral investment agreement negotiation in the US is actually a conditional orientation oriented mode of capital account liberalization.

China can learn from the experience of the United States, according to the strategic needs of RMB internationalization, and sign bilateral bilateral investment agreements signed by the future strategic partner countries, and take the qualification of China's financial market access as a strategic tool for our government to promote RMB internationalization.

Through conditional orientation and opening up in the domestic market, we will provide impetus for the strategic goal of RMB internationalization.

In contrast, the full liberalization of capital account will only waste our good brand or strategic resources.

China's current RMB internationalization can be promoted through the following ways: (1) enhance the dependence of overseas customers on Chinese products through the construction of overseas sales channels and the improvement of product quality, while supplemented by RMB trade financing to promote the valuation and settlement of RMB export products.

(2) speed up the internationalization of financial services industry.

On the one hand, we should speed up the opening up of the financial services industry, allow more foreign banks and foreign financial institutions to operate Renminbi business, and improve market efficiency and service quality through orderly competition in the domestic financial services market.

On the other hand, we should speed up the internationalization of domestic financial institutions and seize market share in the traditional financial industry in Asia, and provide efficient and convenient international RMB business.

(3) liberate the function of the Treasury bond market from a single government budgetary tool, better play its financial market benchmarks, monetary policy operation platform, the internationalization of the RMB and the function of the safe port, improve the scale, efficiency and liquidity of the market, and gradually open its onshore investment to the central banks and institutional investors with strategic importance trading partners and monetary partner countries.

(4) to create RMB bonds in Shanghai free trade area and encourage emerging market economies and developing countries to issue government bonds for their infrastructure development.