Impact of Capital Account Opening on RMB Cross-border SettlementEmpirical Analysis Based on Monthly Data from 2012 to 2022

Based on the monthly data from 2012 to 2022, the specific transmission mechanism of capital account liberalization affecting RMB cross-border settlement was explored, and the impact of macroeconomic factors on RMB cross-border settlement was tested using the error correction (VECM) model from the perspective of long-term equilibrium and short-term fluctuation. Furthermore, the relevant paths of cross-border settlement around economic fluctuation were studied using the time-varying parameter vector autoregressive (TVP-SV-VAR) model to examine the influence of capital account liberalization. The results show that exchange rate and offshore market are the main channels through which capital account liberalization affects RMB cross-border settlement. The price mechanism supplemented by appropriate capital controls can effectively avoid arbitrage risks, and the lack of capital account liberalization leads to the current interest rate management mode restricting the cross-border flow of RMB to a certain extent. Using the offshore market to play a price discovery function can further improve the RMB market-oriented pricing mechanism. Based on this, policy suggestions are put forward from the perspectives of prudent capital account opening, exchange rate liberalization, interest rate marketization and offshore market construction, so as to alleviate the adverse impact of capital account opening on cross-border trade settlement and promote the development of RMB cross-border settlement in the post−COVID−19 era.