Status and prospects of HKG offshore market based on RMB internationalization: A non-linear regression model using Granger-causality test

^a Shanghai University of International Business and Economics, Finance, School of Finance, Shanghai, 201210
^b Beijing University of Technology, Finance, College of Economic and Management, Beijing, 100124

^* Corresponding author: leon_gao2002@126.com
zhangjing9315@emails.bjut.edu.cn

Abstract

Over the past eighteen years, Hong Kong has developed the simple deposit business of the local RMB market into the world’s largest offshore RMB hub by virtue of its advantages as an international financial center.

Firstly, this paper introduces the specific situation of cross-border use of RMB, collects historical data on the offshore RMB market in Hong Kong through a desktop research approach, and reviews the development of the offshore RMB market in Hong Kong using the process of RMB internationalization as a clue. Secondly, the current opportunities and challenges facing the Hong Kong offshore RMB market are elucidated from three dimensions: demand, supply and exchange rate movements of RMB in the Hong Kong offshore market, respectively. To further illustrate the potential development of Hong Kong’s offshore market, this paper takes the development of offshore financial markets and RMB internationalization as a specific entry point, constructs a quantitative model, and obtains the conclusion that offshore financial markets have a positive impact on the internationalization process of RMB. On this basis, the paper illustrates the development potential of Hong Kong’s offshore market in the context of its specific situation. Finally, synthesizing the reflections in the whole paper, this paper makes certain analysis on the development direction of Hong Kong’s offshore market in the light of the blueprint of the national 14th Five-Year Plan.