Our Country Foreign Exchange Reserve Cur And The Capital Structure Optimization Disposes And Uses The Research

The foreign exchange reserve is a core of the international monetary system and an important problem of the international finance field. It has been receiving the general concerns of the international financial institution and governments of various countries all the time. Foreign exchange reserve accumulation of China has risen dramatically in recent years, the scale is accumulated to 1,200 billion dollars up to the end of March, 2007.Although the amount of foreign reserve is huge, the large share focus on US dollar and US assets, especially treasury bonds. The rising current account deficits and external debt of the United States have increased the pressure on the depreciation of US dollar and on central banks to diversify away from the US dollar. So active management of extra reserves should be operated to increase the return while maintains the safety and liquidity.This assay estimates the optimal portfolio shares among the main currencies and assets. To assess the composition of currency in our country, we first analyze the features of composition in global and especially of developing countries and come out with the overall estimation of the currency composition in China. Then the assay uses the mean-variance framework that comes from Markowitz portfolio selection theory, combining constrains of the composition of international trade and external debt. This framework is used to estimate the optimal currency share in our countries' foreign exchange reserves. To analyze the asset portfolio, some asset types are discussed as a shift from US treasury bonds. For example, the investment in blue chip stock of developed countries is one option and the increasing holding of gold reserves is the other. In the end we give out proposal on the management of foreign exchange reserves: dividing the reserve assets into liquidity management and active management. By liquidity management, we maintain the liquidity and safety of reserve asset; by active management of professional institution, we get the high return..