Research On Macroeconomic Impacts Of China's Tremendous Amount Of Foreign Exchange Reserves

Foreign exchange reserves are recognized as a reflection of one country fortune, which play an important role in adjusting international payment, stabilizing foreign exchange rate, maintaining international credit standing and improving international competitive edges, etc. In March 2007, the balance of China's foreign exchange reserves burst 1 trillion U.S. dollar barrier reaching 1.202 trillion U.S dollar and surpassed Japan as the country holding the largest foreign exchange reserve. While from the present prospect, the reason causing the rapid growth of foreign exchange reserve has not been thoroughly changed in short term, so the growing tendency of China's foreign exchange reserve should not be massaged. On the one hand, 1 trillion U.S dollar handsome reserve signifies China's abundant international settling power, in some extent demonstrates China's economic power influencing the world. But various evidences show that substantive foreign exchange reserve should lead to China's internal and external economic disequilibrium and bring some negative impacts on its healthy and sustainable economic development, therefore we should finding out the influencing mechanism of tremendous amount of foreign exchange reserve and exploring the routes of improving foreign exchange reserve operating efficiency, should definitely bring important theoretical and practical significances to promote internal & external national economic equilibrium and harmonious development.This essay stands on the cut-in point of tremendous amount of foreign exchange reserve and applies economics theory to systemically analyze the macro impacts of tremendous amount of foreign exchange reserve. This essay is divided into three parts. Part 1: General theoretical overview on the macro economic impacts of foreign exchange reserve. Defines foreign exchange, international reserve and foreign exchange reserve and analyzes the birthing channels of foreign exchange reserve, also expatiates the influencing mechanism of foreign exchange reserve imposed macro economy, which lays theoretical foundation to analyze the macro impacts of tremendous amount of foreign exchange reserve on China's economy. Part 2: Analysis on the macro economic imparts of China's tremendous amount of foreign exchange reserve Through historical review on the formation of China's tremendous foreign exchange reserve, first the part analyzes the direct reason causing such amount of foreign exchange reserve. Guided under macro economics theory of foreign exchange reserve, this part takes empirical research on the macro impacts of tremendous amount of foreign exchange reserve on China's money supply, price index, foreign exchange rate and overall national economy. Part 3: Countermeasures and advices to strengthen the management and operation of foreign exchange reserve. Based on using international advanced foreign exchange reserve management experiences as reference, this chapter respectively delivers relevant counter measures and advices to strengthen China's foreign exchange reserve operation and management from three aspects: foreign exchange reserve management system, size of foreign exchange reserve, application of foreign exchange reserve.