| Abstract | The main driving force of RMB internationalization isasset demand in the international market, rather than transaction demand. However, asset demand is much more unstable than transaction demand. Thus, RMB internationalization via asset demand may bring the inverse risk of RMB internationalization. This indicates that the capital account should not be opened too early, and too rashly. However, the unstable asset demand may occur only if the asset hold by international community is not large. When the asset held by international community reachesto a certain scale, RMB itself will generate endogenously a stabilizationmechanismwith regard to its price (or exchange rate). Therefore, increasing asset demand under the conditionof no inverse risk is the key driving force of RMB internationalization. In this paper we propose a new strategy of RMB internationalization, that is, bond strategy. We argue that the bond strategycan not only increase asset demand effectively, but also reduce the inverse risk of RMB internationalization.Given the economic fundamentals and the development trend in China, China has a full capacity toimplement thisstrategy. Moreover, this strategy will also benefitthe growth transformation of China, and provideresources to protect Chinese economy and nationalsovereignty. |