A Study On The Optimal Amount Of International Exchange Reserve In China

According to China State Administration of Foreign Exchange, at the end of 2004, China's foreign exchange reserves had reached to the amount of 600.9 billion US$, adding 206.7 billion US$ compared to the last year, and at the end of 2005,China's foreign exchange reserves was 818.872 billion US$, adding 208.9 billion US$ compared to 2004.It is a great problem that the huge amount of foreign exchange accurd in China. This paper mainly discuss the most suitable amount of foreign exchange for China, combining with the new situation both domestic and abroad, at the base of the past research and works by other economists, draw a conclusion and give some suggestions.This paper consists five chapters.Chapter. 1 generally introduces the background of this research, the past route of the relative research both in domestic and abroad. Chapter.2 mainly discussed the concept of the most suitable amount of foreign exchange reserves and the scalar variable and determinants. I talks about the four kinds of the concept and compare each other, we give our concept of the most suitable amount foreign exchange:"the amount which has the marginal benefit equal with the marginal cost is the most suitable foreign exchange amount." Otherwise we discuss the several determinants.Chapter.3 we introduce every method which measure the amount of foreign exchange from the qualitative analysis and quantitative analysis.we focus on the marginal cost and benefit method and analyze the strength and weakness of each method.Chapter.4 we give the substantial evidence analysis about the amount of China's foreign exchange reserves,at the base of the past research,we measure China's most suitable amont of the foreign exchange reserves ,combining the comparison method and marginal cost -benefit method.At the last Chapter.5 we draw some conclusions and give the relative suggestions about China's foreign exchange reserves and the management of it.