The Research On The Appropriate Size And Strategy Of Management Of Foreign Exchange Reserve In China

The size of foreign exchange reserve of china has entered a period of rapid growth since1990.Currently,China has becomes the country which has the most largest amount of foreign exchange reserves in the word and also become the first country whose amount of foreign exchange reserve exceeds super-trillion dollars.So,how to manage and use these huge amount of foreign exchange reserve effectively becomes a critical economic issues in the china . The study of management of foreign exchange reserve of china is of the theoretical and practical value.This article can be divided into these parts as follows:Firstly,Based on the basic theory of appropriate Size of Foreign Exchange Reserve, we defined the connotation of appropriate size of foreign exchange reserve,then we make a course of reviewing and assessing for the calculating the appropriate size of foreign exchange reserve in and out of china.Secondly,the paper empirically analyses various factors that may be affect China's foreign exchange reserve according to the actual situation of China's foreign exchange reserves and get the cause of formatting huge amount of foreign exchange reserve in china currently.Thirdly,Considering the basic functions of foreign exchange reserve of china and factors which affect the demand of foreign exchange reserve of china,we establish a adjusted model of Agarual based on the traditional model of Agarual.Then,we calculate the appropriate Size of Foreign Exchange Reserve of china with the adjusted model of Agarual and compare the result with the actual data of China's foreign exchange reserves currently.We find that the actual size of China's foreign exchange reserves has far exceeded the optimal size of China's foreign exchange reserve currently.In addition,we make a description of negative impact of China's economic operation by the Super-appropriate foreign exchange reserve.Finally,upon the analysis above,we pick up the measures to advance and perfect the level of management of huge amount of foreign exchange reserve of china. Based on the concrete national condition and the economical condition of china,comparing and summarying scholar's viewpoint, the paper proposes positive tentative plan about the localization,corporate governance,operational and fund-Pouring pattern for the National Foreign Exchange Investment Company Which will be established in the near future.After the founding of the National Foreign Exchange Investment Company is established,the management pattern of foreign exchange reserve in our country will be changed tremendously.In the Future,the foreign exchange reserve management frame of our country will be composed by two parts.One part of foreign exchange reserve will be retained by central bank, providing transaction demand and the daily demand of the foreign exchange reserve.This part will assure security and the fluidity . The other part of foreign exchange reserve will be performed by the National Foreign Exchange Investment Company to utilize and manage. The existed exchange control channel in our country will be effectively conformited , the power and responsibility relations of exchange control also can be cleared . Under the management of National Foreign Exchange Investment Company,our country can independently choose the direction of investment on our own according to the change of international and domestic economic situation.It is also advantageous to gradually improving the structure of reserve property of foreign exchange reserve of our country , defusing financial risks , preserving and increasing the value.