Exploring Factors Affecting Choice of Currency for Pricing and Settlement in International Trade

Abstract

The purpose of this paper is to explore the factors affecting the choice of currency pricing and settlement in international trade, and to find practical policy recommendations to increase the proportion of RMB as pricing and settlement currency. Based on the perspective of micro-enterprises, this paper chooses centrifugal pumps, vacuum pumps and display models which belong to manufacturing industry for empirical analysis. There are different products in terms of market competitiveness, Chinese enterprises’ market share and product differentiation. The data of industrial enterprises producing these three kinds of products from 2011 to 2012 is matched with customs data for regression analysis. The least square method is used to empirically test the influencing factors of currency pricing and settlement choice. The results show that: Firstly, the effects of intermediate input cost, present gross product price and a number of employees on the choice of currency pricing and settlement are positive and significant. Secondly, product heterogeneity, enterprise nature and trade mode have no significant positive impact on the choice of currency pricing and settlement. Because the number of products and sample selection is too small, product heterogeneity, enterprise nature and trade mode are not significant.