The Factors About Excessive Growth Of China's Foreign Exchange Reserves

Foreign exchange reserves are held by a government's foreign currency reserve assets of the international part of a national monetary authorities to hold and can be readily convertible foreign currency assets. Since reform and opening, China's extreme shortage of foreign exchange reserves from one country, jumped to the world's number one power, which no country can match. However, in recent years, with the development of national economy, China's foreign exchange reserves grew too fast, too big, the development of our national economy has brought many negative effects, therefore, the rapid growth of China's foreign exchange reserves, the factors that control growth rate and size of foreign reserves, has important theoretical and practical significance.China's foreign exchange reserves from 1980 to 2010, only 30 years, from the negative reserves to more than two trillion U.S. dollars, regardless of its size or its growth rate are very impressive and worthy of study. China's rapid economic growth, exports and foreign direct investment in the rapid expansion of the growing trade surplus, the appreciation of the renminbi, China's foreign exchange reserves, all of which are caused by excessive growth of roots. Foreign exchange reserves is a "double-edged sword" in promoting the continuous development of a country's economy at the same time, the excessive growth of national economy also brought inflation, the weakening effects of monetary policy, increasing trade friction, and increase appreciation of the renminbi and other negative impacts. This paper uses cointegration analysis on the factors affecting foreign exchange reserves, empirical test results show that: economic growth, foreign debt, trade, exports, foreign direct investment, exchange rates are positively correlated with foreign exchange reserves, and economic growth, the greatest contribution of the foreign exchange reserves. Finally, our current economic situation, and proposed a slowdown in economic growth and reduce the "double surplus", improve the RMB exchange rate formation mechanism and other measures to control the excessive growth of China's foreign exchange reserves.