ABSTRACT This paper examines how U.S. monetary policy is transmitted to the renminbi (RMB) within China's onshore–offshore exchange‐rate structure. Using monthly data from 2012 to 2025 and a time‐varying parameter vector autoregression (TVP‐VAR) model, we identify how adjustments in three dimensions of U.S. policy—prices, interest rates, and liquidity—affect the onshore (CNY) and offshore (CNH) markets. The estimates show apparent differences across channels and between the two markets. Movements in the U.S. Dollar Index exert the most persistent influence and become more important when global uncertainty rises. Interest‐rate shocks also matter, but their effects depend on the policy environment, whereas liquidity shocks have limited explanatory power. CNH responds more quickly and more strongly than CNY, reflecting the contrast between a globally traded market and one constrained by domestic policy. Institutional changes, including the 2015 exchange‐rate reform and the later introduction of the counter‐cyclical factor, modify how external shocks influence RMB pricing by altering the interaction between onshore policy tools and offshore market behaviour. Overall, spillovers from U.S. policy to the RMB are neither constant nor uniform; they evolve with shifts in global financial conditions and changes in China's monetary policy. These insights contribute to a deeper understanding of monetary autonomy, exchange‐rate formation, and the evolving role of the RMB in global financial markets.
Liu et al. (Mon,) studied this question.
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