China's Gold Reserve Increases Research

By 2010, foreign exchange reserve balance is about $2.8 thousand billion. And it has increased about 18.7% than the same time of the last year. China has become the biggest country of the world which country has foreign exchange reserve. Dollar reserve is the largest part of the huge foreign exchange reserve. There is a great risk, especially after financial crisis, it is facing the emergence of depreciating. In recent years ,although gold reserve has increased in China, and is the fifth country on the world at present, but the gold reserve relative proportion of foreign exchange reserve is still very low. To adjust the structure of international reserve of our country, and increase the gold reserves of international reserve are best option to deduce the reserve risk.This article first to analysis the changes of international reserve in the different monetary system, and then analysis the gold reserve security research by two aspects—the establishment of a regression model and the empirical analyses. We can get the relations between the price of gold and dollar exchange rate by the regression model. It means that increase the gold reserve can effectively reduce the foreign exchange reserve of the exchange rate risk. Secondly, the article summarizes the situation of our gold, and by the international comparisons of the gold reserve, to find out the distance of gold reserve between China and the developed countries. We can summary our country's gold reserve status and problems. Chapter four studies the modest scale of gold reserve. On one hand, concluding the achievements of later scholar about the appropriate scale of the gold reserve. On the other hand, according to the portfolio theory, determine the moderate scale of China's gold reserve. By comparing the distance between our gold reserve and the appropriate scale of the gold reserve, to get the gold reserve should be increased. And increasing the gold reserve is an important method to achieve sustained development. So our government should try their best to make the gold reserve near the appropriate scale. By the third chapter's analysis of the current situation of China's gold reserve and the fourth chapter's analysis of the appropriate size gold reserve, we can conclude that there is still a gap between China's gold reserve and the appropriate size gold reserve, we still have a large space for holding, and it's reasonable for China's holdings of gold reserve. The last part of the article, I put some methods to hold the gold reserve. Finally, the article also put forward some of my own suggestions towards the debate whether China should increase the gold reserve.