A Study On China's Foreign Exchange Reserves Effective Management

After Asia Financial Crisis, most countries and regions, especially those newly-em erging market nation or economic agents, have increased their scales of FX reserves. The practice brings about more challenges to the management authorities. As a result, issues, such as how to strengthen Foerign exchange reserves management, calculate FX reserves risks and build up an integrated Foreign exchange reserves management system, have attracted attention from international organizations, scholars and governments. China has the largest scale and the highest growth rate of Foreign exchange reserves in the world. Unfortunately, the FX reserves low-effective management has negatively influenced its micro and macro economic and social environment. With the continuing growth of China's FX reserves, problems, for example, how to control the growth rate and scale, how to optimize currency and capital structure, how to diversify risks, how to stabilize and gain the greatest value, are concerned and urgent. From theoretical perspective, scholars have not deeply researched the systematic management of Foreign exchange, especially on the efficiency, which makes the research not only enriches theoretical research but extends our practice.The thesis focuses on China's Foreign exchange Reserves Effective Management, developing with the logic of "Exist question- Analyze question-Resolve question". First, based on the summary of related theory and literature, it reviews the history of China's foreign exchange reserves managements and concludes the characteristic of different periods. Though empirical and theoretical examination, it draws a conclusion that China's Foreign exchange reserves management is in Low-Efficiency status, and the reasons derive from various aspects, but the most significant one is lack of a perfect and rational management system. Under the external and internal circumstances, the unsustainable status should be enhanced and promoted. Furthermore, the paper introduces the concept of Foreign exchange reserves effective management and points out the process integrates pursuing management both efficiency and profits. From the theoretical analysis of the Conception,General Principles, Purpose and Major Content of Foreign exchange reserves effective anagement, the paper exemplifies and summarizes international experiences to provide theoretical and practical reference for china's Foreign exchange reserves effective management. Lastly, from macro perspective, it builds up POMDOI system for Chinese FX reserve effective management, and from micro perspective, it offers concrete political suggestion and strategy.The originality mainly lies in: (1) It is the first time to conclude that Chinese Foreign exchange management is low-effective, from the empirical and theoretical perspective.(2) It points out the basic reason is lack a perfect, reasonable and scientific Foreign exchange reserves management system. (3) It designs POMDOI for Chinese Foreign exchange reserves management system and reforms the conception, model and thinking patterns.(4) It sets up the test index for Foreign exchange reserves management system.(5) It forms the target zone, fluid currency structure zone and profitable currency structure zone for Chinese Foreign exchange reserves management.(6) It differentiates and defines the test approaches of main risks of foreign exchange reserves and systemizes Chinese Foreign exchange reserves risk management.