Since local banks in Hong Kong started personal RMB deposit and exchange business in 2004 or allowed individuals to take RMB out of the country earlier, people began to think that all these overseas RMB existed abroad. The reason for this misunderstanding is that people lack a comprehensive understanding and understanding of the flow of funds and the settlement process. According to currency and its liquidation principle, the liquidation of all currencies follows the following three laws: first, the final liquidation of all currencies is completed in the issuing country, and the liquidation of the central bank is the final liquidation; Second, all the money is deposited in the banking system, except the cash collected by the people; Third, all settlement and liquidation are completed by borrowing between bank accounts, that is, cross-border settlement (liquidation) between banks. According to the above three laws, it is easy to draw the conclusion that "all currencies are deposited in the banking system of the issuing country". That's true. Reflected in reality, that is, all US dollars are deposited in the banking system of the United States, and all Euros are deposited in the banking system of the euro zone ... The RMB also follows the same law.
According to the clearing channel arrangement made by the Bank of China for the personal RMB deposit and exchange business of Hong Kong banks, the RMB in Hong Kong will eventually be deposited in the People's Bank of China through BOC Hong Kong, which will serve as the RMB clearing bank in Hong Kong, and BOC Hong Kong will open a RMB clearing account in Shenzhen People's Bank and join the RMB large-value payment system. Other banks in Hong Kong need to open RMB accounts in BOC Hong Kong. Let's look at the RMB cash that individuals carry out of the country. After opening up "free travel" and raising the exit limit of RMB, a large amount of RMB cash was brought in for circulation. Local businesses generally have the following ways to deal with the received RMB cash: first, hoarding, but people do not tend to do so; The second is to deposit in the bank, enter the deposit account, and finally enter the above banking system. Therefore, all RMB cash flowing out of the country, except a small amount of reserve funds left by banks, will be remitted back to domestic banks, because only in this way can we meet the economic principle of maximizing interests. According to the same principle, the RMB settlement of cross-border trade, which started in July last year, was also carried out under the mode of cross-border bank agent settlement and clearing. Therefore, the overseas RMB is not the RMB deposited overseas, but the RMB held overseas and deposited in the domestic banking system.
It is important to know this, because this is a completely different place between local currency settlement and foreign currency settlement. When foreign currency is used for settlement, the ownership of foreign currency funds has actually shifted with the settlement direction, and the foreign currency paid by China has been remitted abroad and left China's banking system. When RMB is used for settlement, although the ownership of RMB funds has been transferred, it remains in China's banking system regardless of receipt and payment.
Myth 2: Overseas RMB has the nature of foreign exchange.
Is offshore RMB foreign exchange? For the local area, it is undoubtedly one of many foreign currencies; However, China, as the issuer of RMB, should not be regarded as or have the nature of foreign exchange.
This is also inconsistent with jurisprudence and international practice: first, the sovereign currency of a country will always be legal tender for its issuing country, no matter who holds it. Imagine, if our country treats and manages overseas RMB as "foreign exchange", how can we position this going-out RMB internationally? Second, the development of RMB payment and settlement function from domestic to cross-border is the result of the natural evolution of RMB payment and settlement function with the development of China's economy and according to the law of monetary development. It should not be labeled as "foreign exchange nature" to artificially dwarf or restrict RMB payment and settlement function. Furthermore, the RMB obtained overseas through economic exchanges with China is not foreign exchange. For China, RMB is the sovereign currency issued by China, and it cannot be treated differently because it is not used as foreign exchange when it is paid, but as foreign exchange when it is held.
Myth 3: RMB external liabilities = foreign debts.
In fact, RMB external liabilities cannot be simply equated with foreign debts. It is indeed China's external debt and a part of the currency circulation of the People's Bank of China, but it is quite different from foreign currency external debt.
From a technical point of view, the concrete manifestation of RMB external liabilities is holding RMB abroad, so its essence is the external liabilities of the People's Bank of China, that is, the part of the RMB held by overseas entities in the numerous currency circulation of the People's Bank of China, which is reflected in the indicators such as M0, M 1 M2 used to measure the money supply in the balance sheet of the People's Bank of China. In other words, before the renminbi goes out, the above indicators are all internal liabilities of the People's Bank of China; After the RMB goes out, the above indicators will be manifested in two parts: internal liabilities and external liabilities of the People's Bank of China.
External liabilities calculated in local currency are quite different from external liabilities. From the perspective of repayment, the local currency is the legal tender of China when it is in foreign debt, and its money supply is controlled by China. Foreign currency is the legal tender of other countries-foreign currency, which China needs to obtain through exchange, and its money supply is controlled by foreign central banks.
From the perspective of risk, this paper explains the risk of foreign debt in local and foreign currencies by borrowing a passage from mishkin, former director of the Federal Reserve, in The Next Great Globalization: "The double crisis of currency crisis and financial crisis rarely occurs in developed countries, because their debt structures are very different from those in emerging market countries. The debt of developed countries is usually denominated in local currency and has a long term. When currencies in developed countries depreciate, the impact of depreciation on corporate balance sheets is very limited, because debts are denominated in local currencies. Therefore, depreciation will not trigger a financial crisis. " Through the development of RMB settlement of cross-border trade, it is beneficial to China to promote the local currency conversion of China's external liabilities, both macroscopically and microscopically.
Myth 4:
Cross-border RMB = capital account convertibility
Internationally, controls related to capital flows are usually divided into two categories, one is foreign exchange control, and the other is capital control. Foreign exchange control usually refers to the control of local and foreign currency exchange activities, such as current account convertibility and capital account convertibility. Capital control refers to the control of cross-border capital flows, mainly the control of all kinds of transactions classified under the column of "capital and financial account" in the balance of payments, because such transactions have typical income (profit) nature.
Currency convertibility will affect the cross-border flow of capital, but the cross-border flow of capital is not necessarily bound by currency convertibility, especially the cross-border flow of non-convertible local currency capital. Functionally, RMB cross-border is an extension of RMB payment and settlement function; As far as capital flow is concerned, it belongs to the cross-border flow of non-convertible local currency. This is different from the convertibility of capital account, which is embodied in the following aspects: First, the cross-border of local currency leads to changes in the external creditor's rights and debts of local currency. As far as China is concerned, the control right of monetary policy, which affects the changes of foreign debts of RMB, is far less risky in China than in foreign currencies.
Capital account convertibility controls the exchange behavior when trading under "capital and financial account". In China, the "capital and financial account" transaction itself is managed by the government's examination and approval system, that is, transactions that belong to the nature of capital and financial accounts (cross-border direct investment, securities investment, etc.). ) need to be approved by relevant departments. For example, foreign direct investment needs the pre-approval of the commercial department, and so does foreign direct investment; Cross-border securities investment (including issuing stocks and bonds, etc.). ) It needs the approval of the CSRC and other departments. Therefore, RMB cross-border settlement involves not capital account convertibility, but local currency settlement of capital and financial account transactions. Just as RMB settlement of cross-border trade solves the problem of trade facilitation, RMB settlement of capital and financial account transactions solves the problem of investment facilitation, which helps to promote the opening of China's capital and financial markets. Moreover, this openness can be regulated by the monetary policy that RMB is the sovereign currency of China, instead of the previous foreign exchange control.
Myth 5:
Cross-border RMB = RMB internationalization
This is a hot topic in academic circles. It is not difficult to find that the current cross-border RMB is still far from the internationalization of RMB by examining the development stage of functions of money.
A path to judge the development of international currency: cross-border trade settlement in local currency (the payment and settlement function of currency extends from domestic to overseas) → overseas holding of local currency (the asset function of currency) → overseas demand for maintaining and increasing value → overseas holders participating in local currency financial market → developing local currency financial market (the trading and investment function of currency) → overseas holding of local currency assets (the stored value function of currency). Therefore, currency internationalization will be a process of gradual development in functions of money.
If the RMB also follows this development path, then the RMB is currently in the initial stage of internationalization, and the payment and settlement function is still in the development stage from domestic to cross-border. Whether it can be internationalized along the path depends on the development of local currency financial services and financial markets, that is, whether it can meet the needs of overseas entities for maintaining and increasing value, so as to develop the functions of international trading, investment and storing value of RMB.
All along, the RMB in functions of money, China mainly serves domestic entities. Since the RMB was used for cross-border trade settlement in July last year, the RMB has faced the demand of serving overseas entities.
Generally speaking, there is a positive interaction between the appreciation of local currency and the development of domestic financial system. However, due to the diversity of financial services such as overseas cross-border provision and consumption, whether the domestic financial system can support the appreciation of the local currency and enjoy the greatest benefits in the process of appreciation of the local currency depends on a series of issues such as institutional arrangements, the developed degree of financial markets and financial institutions. Therefore, the internationalization of RMB is a long and arduous process. At the same time, we should also guard against the risks of demand moving out, market moving out and RMB pricing power moving out because the development of domestic financial market and system cannot keep up with the development of real economy.