Research On China's Foreign Exchange Reserves

Foreign exchange reserve is the core of the international monetary system and of vital importance in the area of international financial research .It concerns the government's ability of balance of payments adjustment and exchange rate stabilization , which makes the financial authorities keeping close watch on its development .the scale of foreign exchange reserve is the core of its administration.This article gives a deep analysis of the elements affecting the supply and demand of foreign exchange reserve , and accordingly establishes a model of rational scale,In which a quantitative and qualitative methodology-based area of foreign exchange reserve is raised to suit the reality of china .the conclusion is that the current amount far exceeds the rational level . In order to eliminate the disadvantages caused by excess scale , some measures must be taken .Since the reform and opening up of China , with the growth of Chinese economy and the development of external economic exchange ,the scale of Chinese foreign reserve experience a rapid increase from 0.84 billion dollars in 1979 to 1066.3 billion dollars in 2006 with the annual increase rate of 33%.Although it can bring some positive effects to the economy ,the substantial foreign exchange reserve has brought many negative influence to Chinese economy development. Accordingly,studies on the optimum scale of Chinese foreign exchange reserve and putting forward relevant propositions have become the hot issues in the research on Chinese macro economy.This thesis synthesizes the research results about the theoretical analyses of foreign exchange reserve optimum scale, and analyzes the optimum scale of Chinese foreign exchange reserve through several positive methods considering the situation of China.The thesis then, based on the analysis result, analyzes the reason and economic influence of Chinese excessive reserve scale, and puts forward relevant policy propositions about Chinese reserve scale management.