Countermeasures To Prevent RMB Cross Border Arbitrage Risks

　　 The main way of cross border arbitrage of RMB

(1) RMB cross border exchange arbitrage. In the case of RMB capital account free convertibility, the exchange rate of RMB between domestic and foreign is inconsistent, resulting in cross border arbitrage of RMB. For example, the exchange rate of RMB against the US dollar offshore and on shore is 6.19 and 6.17 respectively. When the offshore RMB exchange rate is significantly lower than the onshore exchange rate, domestic A can export foreign currency such as the US dollar to foreign countries through importing US $12 million of goods to foreign partner B. After receiving the US dollar, the foreign enterprise B will change the US dollar to 74 million 280 thousand yuan by the offshore exchange rate, then import it to the A through the reverse trade and pay in Renminbi. Through this round of import and export process, the domestic dollar and other foreign currencies realized the risk free arbitrage by 240 thousand yuan through the trade of domestic foreign exchange. On the contrary, if the exchange rate of offshore RMB market is significantly higher than that of onshore exchange rate, domestic enterprises can realize the risk-free arbitrage when they pay RMB and foreign currencies such as US dollars separately when they import and export.

(two) offshore interest spread on shore. Offshore renminbi loan interest rates have been significantly lower than the shore level for a long time, which has stimulated the most popular internal loan business in recent years. Take the case of China as an example, at present, the 1 year RMB lending rate in the market is about 4.5%, while the benchmark interest rate for domestic one-year RMB loans is 6%. The banks also need to go up to varying degrees on the basis of this. The difference between Mainland and mortgage loans is about 1.5 percentage points, and the cost of financing is obviously lower than that of the mainland market.

(three) cross currency interest spread arbitrage. This approach is similar to the former one, but it takes the interest rate difference between the domestic renminbi "deposit" interest rate and the offshore foreign exchange rate (such as the US dollar) loan interest rate and the difference between spot and forward. In the channel of RMB appreciation, spreads and remittance differences will bring about a bumper harvest. For example, when an enterprise A deposits in the territory and asks to issue a letter of credit to an offshore partner B, B obtains 22 million US dollar foreign exchange loan in accordance with the offshore interest rate of 2%, and pays the foreign exchange to A by importing the goods to A; A will exchange foreign exchange for RMB 135 million 740 thousand yuan on the shore exchange rate, and get a 6% annual return through financial management and other means. After the expiration, A obtained RMB 143 million 884 thousand and 400 yuan in the domestic renminbi "deposit" and exchanged the foreign exchange loan principal and interest at the maturity exchange rate. During this period, the appreciation of the RMB will be 1 yuan to 6.15 yuan. At this point, B enterprises receive a profit of $23 million 395 thousand and 800 and pay $440 thousand interest to earn $955 thousand and 800. In order to control risks, long-term forward exchange rate risk can be locked by signing forward foreign exchange contracts. The deposit is also a broad concept. In fact, it is a Renminbi asset in the territory. In practice, it usually achieves profits through buying financial products or accepting notes to be transferred, and of course there may be other ways.

(four) arbitrage in re export trade. Entrepot trade refers to the way in which domestic enterprises purchase goods from overseas A enterprises, store them in bonded supervision areas in the territory, and resell them to overseas B enterprises as a matter of fact. Unlike general trade, entrepot trade does not require goods to enter, and there is no need for customs declaration. The entrepot trade will make use of domestic and foreign spreads and exchange differences to achieve arbitrage.

(five) cross border trade financing arbitrage. That is, domestic enterprises integrate into Renminbi from overseas banks in the form of trade financing. For example, A, a domestic company, entered RMB 55 million yuan with an annual interest rate of 3% yuan from an overseas bank with an export trade contract of 55 million yuan, and used this fund to carry out its financial activities, earning 6% of its profits. After 1 years, it gained 1 million 650 thousand yuan of risk free profits. In recent years, there has been an endless stream of innovation in RMB cross-border trade financing, for example, RMB agreement financing, RMB overseas payment, RMB agreement payment, RMB forward letter of credit and so on. Although the names of these innovative products are different, their essence is the indirect financing business provided by domestic banks to domestic enterprises through their overseas branches or correspondent banks. These businesses are not included in the management of foreign debt quotas. Banks and enterprises can make full use of Renminbi long-term letter of credit, overseas payment, payment by agreement, etc.

The above three ways of arbitrage are mainly done by enterprises in the process of import and export trade, and the latter two ways of arbitrage are mainly done by trading companies. In the process of import and export trade, the use of arbitrage window to achieve certain arbitrage profit is permitted and also the rational behavior of enterprises. The Arbitrage Behavior of trade companies and other entities under the cover of false trade is of no benefit to the real economy, and it should be strictly prohibited.

　　 Positive effects and risks of arbitrage activities

(1) the positive role of arbitrage activities in the real economy. First, cross border arbitrage of RMB can provide enterprises with hedging and hedging risks. Two, cross-border arbitrage of RMB will promote the price of domestic and foreign RMB to strike a balance. RMB funds will move from lower prices to higher prices, which can play an "invisible hand" regulatory role, better reflect the market supply and demand relations, help to re distort the market price to a balanced level. Three, the cross border arbitrage of RMB will exert pressure on the RMB exchange rate formation mechanism and interest rate marketization reform. It will play a positive role in speeding up the marketization reform process of exchange rate and interest rate in China.

(two) potential risks of cross border arbitrage of RMB. First, the import and export entities are addicted to capital operation, which not only leads to a virtual increase in trade figures, but also shifts hot money from foreign exchange to offshore RMB inflows, which is even more harmful to the state's management of liquidity. Two, the rapid inflow and outflow of RMB cross-border arbitrage funds will have an impact on China's economy. The occurrence of large-scale cross-border arbitrage transactions further aggravates the volatility of cross-border capital flows in China, especially the massive inflow and outflow of large arbitrage funds seriously affect the realization of China's balance of payments, and thus have a greater impact on domestic economic development. Three, there is a certain risk of debt capital repayment in the cross-border arbitrage of RMB. RMB cross border arbitrage is not an isolated phenomenon. Generally, it is realized through products such as long-term letters of credit, overseas payment, agreement payment, advance payment and payment related to cross border trade RMB settlement. However, such business is not included in the current external debt management. Once the business is in poor condition, the capital chain will be broken, which will lead to external payment risks.

　　 Yes RMB Cross border arbitrage is differentiated and treated simultaneously.

(1) push the reform: speed up the marketization of interest rates and the reform of exchange rate formation mechanism. Gradually forming the RMB exchange rate formation mechanism determined by market supply and demand. We should reasonably control the pace and amplitude of RMB exchange rate appreciation, and constantly improve the RMB exchange rate formation mechanism in accordance with the principle of initiative, controllability and gradualism, so as to make the market supply and demand play a greater role in the formation of exchange rate. At the same time, we should expand the fluctuation of the RMB exchange rate, ease the pressure of RMB appreciation, and push the RMB exchange rate level approaching the equilibrium level, weaken the expectation of unilateral appreciation of the RMB market and eliminate the arbitrage space of the exchange rate difference.

We should actively promote the marketization of interest rates. Gradually forming the interest rate formation mechanism determined by market supply and demand, so that the interest rate level can truly reflect the capital supply and demand situation in the market. We should establish a deposit insurance system and gradually liberalize the interest rate of deposits. We should constantly improve the scientific pricing ability of the market, enhance the regulatory role of price leverage on domestic and foreign interest rates, and eliminate the arbitrage space of interest spreads.

(two) strong supervise To enhance the authenticity audit of RMB cross-border trade and investment. The people's Bank of China should pay attention to balance the relationship between financial innovation and risk prevention, increase research and Analysis on innovative products of RMB financing business of cross-border trade of commercial banks, do a good job in risk prevention, keep the development speed and scale of cross-border trade RMB financing products in a reasonable scope, and guide the healthy development of cross-border trade RMB financing products.

When handling cross-border business, banking institutions should strengthen their business management according to the three principles of "understanding your customers", "understanding your business" and "due diligence", strictly do the due diligence in all aspects of cross border trade and investment, strengthen the authenticity examination, strictly examine the relevant documents such as identical, customs declarations, invoices and other related documents, so as to ensure the true background. Take precautionary measures and identify and control RMB cross border arbitrage from the source.

We must strictly guard against cross-border cross-border trade financing and carry out RMB cross-border arbitrage. The financing and repayment requirements are unified and can only be completed in a banking institution. For example, in the re export trade, we should focus on strengthening the management of RMB income under the first and second round of trade. When the re export trade is collected, the banking institutions must strictly examine the authenticity of the relevant documents, and make on-site verification if necessary, so as to ensure the authenticity of the re export trade.

(three) re monitoring: strengthen off-site monitoring and on-site inspection, and build an effective and scientific monitoring platform for cross border capital flow of RMB. Using the people's Bank credit information system, the "negative list" of cross border RMB arbitrage is established. The business entity should make a commitment to the use of funds. Once it finds no arbitrage or money laundering in the context of real trade, it will immediately enter the credit information system to increase the cost of future economic transactions and curb the occurrence of illegal arbitrage.

Based on the existing RMB cross border management information system (RCPMIS), we will upgrade and upgrade the RCPMIS system, and add information inquiry module to re export. Trade And the related information of trade financing and capital flow are separately counted, which fully reflects the RMB capital flow and changes in re export trade and trade financing. We should strengthen coordination and communication with foreign exchange bureaus, establish the concept of coordination and supervision of foreign currency, establish information sharing mechanism, and enhance joint efforts in supervision. We will establish a unified multi-level data collection, monitoring, analysis and early warning system for cross-border capital flows, and build a dynamic monitoring and analysis platform for cross-border capital flows to enhance the level of statistical monitoring and early warning of cross-border abnormal movements of RMB. We should further improve the off-site tracking and verification mechanism for cross-border RMB movements, intensify on-site inspections, and promptly identify and handle abnormal situations such as false transactions and false financing, so as to prevent and resolve the risks and adverse effects brought by cross border arbitrage of RMB.