The Research On The Mechanism Of China's Foreign Exchange Reserves Changes

Since 2001,China's foreign exchange reserves began to keep sustained and rapid growth. According to the reasons for changes in China's foreign exchange reserves,it is not only related to China's economic development model,the macroeconomic operation and the internal and external imbalances,but also has a very close contact with the global production patterns and the changes in global economy operating mechanism.Overall,the growth in China's foreign exchange reserves is an integral part of global foreign exchange reserves changes,which is in the same direction with it.At the same time,China also has its own characteristics.From the reasons for the total global foreign exchange reserves and the reserves distribution changes,we can see that it mainly has bearing on the development of global specialization pattern.Since the 90's of the last century,intra-product division is increasingly becoming a major mode of international division of labor with the development of information industry in the United States.In this division model of labor,countries participated in the global division of labor split into two groups:some developed countries(such as the United States)master a number of industry-leading processes of value chain with its advantages in knowledge-intensive sectors,and transfer product processing segments to overseas that they do not have the elements advantages.So,they become the main providers of the productive services,and engage in the production of products less and less.While some developing countries undertake the production processing and the manufacturing sectors of developed countries by virtue of their advantages of labor costs and other resources,and therefore becoming the global industry's major supplier of manufactured goods,the pattern of global trade has also undergone a significant change. Developed countries' demand for industrial products is increasingly dependent on imports from developing countries,and their trade accounts and then the current accounts keep a long-standing deficit;Developing countries become the global manufacturing base for production of global market and export of industrial products,making their current accounts keep a long-term and large-scale surplus and become an important source of foreign exchange reserves.Further,as the development of intra-product international specialization,the internal operating mechanism of countries which participated in the global division also changed significantly.From the aspect of the United States that lead the world division,its domestic price level particularly the price of manufactured goods no longer depends on domestic production costs and its domestic money supply,but on industrial products price in the international market.While,the development of intra-product international specialization greatly improved the use efficiency of global resources,and at the same time effectively maintained the long-term stability of the world's manufactured goods prices.So since the 1990's,the United States' domestic price has maintained a considerable stability at the situation of continued expansionary monetary policy.In addition,under the intra-product international specialization, the transfer of United States' manufacturing segment enables the growth rate of United States' manufacturing size to slow down.With its continuing current account deficit,the economic growth must rely on consumer demand.Thus,as the inflation is in loss of restraint,the United States can continue to adopt an expansionary monetary policy in pursuit of economic growth. Ample liquidity can not only stimulate domestic consumer demand and development of the domestic service industry and promote the development of U.S.economic growth,but also will spur imports of goods and the manufacturing-driven economies' exports and investment growth. The manufacturing-driven country's economic growth will enable its increased demand for the United States' productive services and stimulate the United States' economic growth.It also can increase the demand of resource-based products so that resources-exporting countries can increase foreign exchange earnings and expand the output.Thus,consumer demand has not only become the main driving force of the United States' economic growth,but also become the ultimate driving force of the global economic growth.In such a cycle model,the United States' sustained current account deficit can explain the formation of the large number outflow of US $;. Continuous outflow of the US $ become a resource of the foreign exchange reserves growth for manufacturing-based economies and the resource-exporting countries.From the inherent mechanism of China's foreign exchange reserves growth,it was mainly attributable to our country's division position in the world.On the one hand,our country participate in the global division of labor with China's advantages of cheap labor,mainly engage in products processing and production of the terminal industrial chain and become the world's leading manufacturing base.The export of a large number of industrial products and the trade patterns of a processing trade make our country's current account continue to maintain a surplus. At the same time,China's manufacturing industry is developed on the base of undertaking the transfer of developed countries' low-end manufacturing segments.Therefore,besides the current account surplus,the capital and financial account also always maintain a surplus as a result of foreign direct investment.A double surplus become the basic characteristics of international payments imbalance.On the other hand,being at the low end of the global industrial chain makes China's overall industrial added value low.With the economic growth,the national welfare's slow improvement restricted the growth of domestic consumption demand.In contrast with the United States,China's economic growth depends mainly on the stimulus of investment and export.Together with the disadvantaged status of developing countries in the global economy and our country's dependence on developed countries' industries,the policy risk of China's exchange rate changes is increased.Therefore,in the case of China's increasingly expanding size of dual surplus,China can only increase foreign exchange reserves to replace a substantial appreciation of the RMB in order to ensure stable macroeconomy.Particularly in the situation of intra-product international specialization,the relationship between China's inflation and money supply is apparently weakening and the price constraint of foreign exchange reserves growth is relaxed.So,changes in reserves become the principal means of balancing China's external imbalance during this period.This is an important underlying reason for the growth of China's foreign exchange reserves.In short,at the situation of intra-product international specialization,the changes of global production pattern and economic operation mechanism,the low-end status of our country in the world division decides the reality of China's foreign exchange reserves growth.Before China's position in the global division of labor does not have a fundamental change,China's foreign exchange reserves will always maintain growing.Even now the whole world facing larger recession pressure,China's trade volume will drop,but still will maintain a surplus.Therefore, the management of official reserves should not be overly focused on the modest scale but should introduce the management of foreign exchange reserves at different levels.Especially for those foreign reserves assets based on policies factors,we should orientate its function to developing reserves and its management and application should emphasize to match with the nation's globalization strategy.The operation of developing reserves utterly should be conducive to ensure the security of China's economic performance and macroeconomic stability.