The Study On The Scale Of China's Foreign Exchange Reserves And It's Impact On The Economic Of China

With the rapid growth of our economic and the foreign economic relations, the trend of trading surplus and FDI inflowing has sustained for long. Besides the long implement of the exchange rate and the system of exchange, settlement and sales of foreign exchange, our country has accumulated a huge foreign exchange reserve.Especially since 1994 when our country reform the management system of foreign exchange, foreign exchange reserve of China has been increasing rapidly in recent years. The average growth rate of foreign exchange reserve is more than 30%. At the end of Feb 2006, our country become to the biggest holder of foreign exchange reserve. At the end of Oct 2006,it has amounted to more than $10000 hundred million. At the end of Jun 2009,it has amounted to more than $20000 hundred million. In recent years, there are more than $4000 hundred million new foreign exchange reserves every year. At the end of June 2010,our foreign exchange reserves has amounted to $24542 hundred million.. Foreign exchange reserves makes great effect on the adjustment of balance of its international payment, maintaining stabilization of currency exchange rate, defending its international prestige and protecting our country's economic and financial security. Facing the quick surge of the foreign exchange reserve scale, more and more academician pay attention to the issue of foreign exchange reserves. What is the most fitness scales of our foreign.According to the contemplation of the issues mentioned above, the whole text try to analyze the proper scale of foreign exchange reserve and it's impact on the economic of China from such aspects:In the first part of this text, the author firstly explains the trading demand,the preventing demand and the developing demand of the foreign exchange reserve. Combine with the analyze of economic data from 1994 to 2009,the author calculate the fitness scale of the foreign exchange reserve and get the conclusion that the real scale of foreign exchange reserve of China is excess to the calculate scale. In the second part, the author analyze the source and the main causes of the foreign exchange reserve. She point out that the main source of the foreign exchange reserve is the surplus of balance of payment. The rapid growth of economic, the foreign exchange system, the growth of short foreign debt and the export-oriented economic development strategy are the main causes of the foreign exchange reserve. The text mainly analyze the huge foreign exchange reserve's impact of our economic, especially the disadvantages which are expressed like:influence the independence and the effect of monetory policy, give the pressure of inflation and appreciation of RMB, disbenifit the economic restructuring, make the management of foreign exchange reserve difficult. Besides, the author makes her own advises of the management of foreign exchange reserve according to the source and causes.Through the whole text, the author use a lot of date to analyze her ideas. The method of analyzing determinants of demand and ratio analysis approach is used to analyze the fitness scale of foreign exchange reserve. The author explains the trading demand, the preventing demand and the developing demand of the foreign exchange reserve to calculate the fitness scale of the foreign exchange reserve. When analyze the disadvantages of huge reserve, the author explains the relation between some economic variables such as the money supply and foreign exchange and analyze the bad effect of huge reserves in the respects of inflation, appreciation of RMB, economic restructuring. That is meaningful to the analyze of real operation of the economic. Besides, there are a lot of deficiency in this text and some questions need to think deeply. The author hopes can make more depth analysis through her after study.