1.5 Comparisons among internationalization index of major currencies

In order to objectively evaluate the gap of the level of internationalization between RMB and major currencies,this report also compiled internationalization index of the dollar,the euro,the yen,and the pound (Table 1—3).Compared with 2010, International currency function of EUR and GBP declined significantly by drag of European sovereign debt crisis. In the fourth quarter of 2011, EUR internationalization index reached 24.86, downing by 2.89% year—on—year; GBP internationalization index reached 3.87, downing by 8.73% year—on—year. Funds outflow from European often chose USD as a temporary haven, which increased market demand of USD and led the USD internationalization index up to 54.18, rising by 1.52% year—on—year. Earthquake and tsunamis occurred in Japan on March 2011. Huge amount of overseas funds transferred back to the country for reconstruction, on the contrary, lot of funds flowed overseas in capturing investment opportunities. Therefore, JPY internationalization index reached 4.56 in late 2011, rising by 5.80% year—on—year.

There is a big gap of internationalization between RMB and the dollar,the euro,the yen and the pound,and internationalization process of RMB is still at the initial stage.It can be seen from the Table 1—3 that although there has been almost forty years of internationalization of the yen,its level of internationalization is still low.Therefore,internationalization of RMB will also be a long—run process,and its realization needs long—term vision and unremitting effort.

Acting as international reserves is one of the three major functions of the international currency,and the status of a currency in foreign reserves is the most straightforward reflection of its level of internationalization.Therefore,people tend to use the proportion of a currency in global foreign exchange reserves to simply describe its level of internationalization.In the modern credit monetary system,the value of money is the value of credit.Only when a currency is widely used as store of value,can we illustrate that the credit value of this currency receives widespread recognition by the international community,and this currency realizes internationalization.As shown in Table 1—4,the glo—bal proportion of the dollar,euro,yen and pound as foreign exchange reserves is 62.12%,25.04%,3.71% and 3.88% respectively,which are broadly similar to the internationalization index of these currencies calculated by us.In a sense,this also provides evidence for the scientific and practical nature of the currency internationalization index compiled by us.

Source:IMF COFER.