One Currency, Two Markets: The Renminbi's Growing Influence in Asia-Pacific

HKIMR Working Paper No.10/2014

36 Pages Posted: 20 May 2014 Last revised: 21 May 2014

See all articles by Chang Shu

Chang Shu

Hong Kong Monetary Authority

Dong He

Hong Kong Monetary Authority; Hong Kong Institute for Monetary Research (HKIMR)

Xiaoqiang Cheng

Hong Kong Monetary Authority

Date Written: May 19, 2014

Abstract

This study presents evidence of the renminbi’s growing influence in the Asia-Pacific region. The CNH market – the offshore renminbi foreign exchange market in Hong Kong SAR – is found to exert an effect on Asian currencies that is distinct from that of the onshore (CNY) market. Changes in the RMB/USD rates in both markets have a statistically and economically significant impact on changes in Asian currency rates against the US dollar, even after controlling for other major currency moves and the transmission of China’s monetary policy to the region. The continuing growth of the offshore renminbi market suggests that the influence of the CNH market is rising, but how long the independent impact will last will likely depend on China’s progress in liberalising its capital account. The findings also suggest that China’s regional influence is increasingly transmitted through financial channels.

Keywords: Renminbi Internationalisation, Renminbi Impact, Offshore Markets

JEL Classification: F31, F42, G15

Suggested Citation

Shu, Chang and He, Dong and Cheng, Xiaoqiang, One Currency, Two Markets: The Renminbi's Growing Influence in Asia-Pacific (May 19, 2014). HKIMR Working Paper No.10/2014. Available at SSRN: https://ssrn.com/abstract=2438641 or http://dx.doi.org/10.2139/ssrn.2438641

Chang Shu (Contact Author)

Hong Kong Monetary Authority ( email )

Hong Kong
China

Dong He

Hong Kong Monetary Authority

3 Garden Road, 30th Floor
Hong Kong
Hong Kong

Hong Kong Institute for Monetary Research (HKIMR)

3 Garden Road, 8th Floor
Hong Kong
China

Xiaoqiang Cheng

Hong Kong Monetary Authority ( email )

3 Garden Road, 30th Floor
Hong Kong
Hong Kong

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