Analyzing Factors Driving Cross-border RMB Settlement based on Panel Data of 65 Countries via Heckman Two-step and Panel Regression Models

In this paper, the Heckman two-step and panel regression models are applied to analyze panel data of cross-border receipts and payments of RMB in 65 countries along the "Belt and Road" from 2013 to 2018, with a view of researching the driving factors of cross-border RMB settlement. The recent years have witnessed rapid growth of cross-border RMB receipts and payments, which plays a vital role in bilateral trade and significantly accelerated the process of RMB internationalization. The results of this study show that signing of currency swap and free trade agreements and the GDP of a country significantly promotes its utilization of RMB as the currency for receipts and payments of cross-border trade activities. Further, countries that are geographically closer to China are more likely to use RMB as the settlement currency. However, the influence of a factor varies across countries from different regions along the "Belt and Road". For example, China’s GDP has different effects on RMB settlement in East Europe and West Asia, indicating that RMB internationalization should be promoted based on regional characteristics.