Study On The Moderate Scale Of Our Country's Foreign Exchange Reserves

Foreign exchange reserve (FR) is the core of the international reserve and of vital importance in the area of international financial research. It concerns the governments'ability of adjusting balance of payment and stabilizing exchange rate,so has been being subjected to the widespread attention of international financing institution and governments in all countries. In the open economic environment, FR is a key index to inspect international economy for a country or district; it is not only an embodiment of macroeconomic operating, but also an important measure for macroeconomic adjusting and controlling.Since the reform of foreign exchange management system in 1994, the FR of China has been increasing rapidly,especially after China joined WTO in 2001,the FR grows at astonishing speed,and at the end of 2007 it has amounted to $1528.2 billion. The large amount FR is playing its positive role,in the meanwhile the coordination between rapidly growing FR and the domestic economic operation has become a tougher problem, and this brought the management of FR pressure.The article has discussed the scale management of our country's foreign exchange reserve.The most important question of FR's scale management is to determine the moderate scale which is suited for our country's economy.This article reviewes the elementary theory of foreign exchange reserve scale first,and showes that the moderate FR scale usually is defined by it's cost or (and) income as well as the domestic economic operation, then reviewes and evaluates the method of measurement on FR. Based of objective evaluation and reference from the predecessor, the article makes innovation on the traditional models(including the Proportion Law and the Cost-Income Law) which are used to verify the moderate scale of China's FR from 1990 to 2006. The conclusion is that the scale of our country's FR is more than the moderate one in recent years.Facing with the superabundant foreign exchange reserve, how to manage effectively is an important problem which we are confronted with now. The article consideres that we should set up the correct concept first of all and correct the wrong understanding, ( for example, people usually consider that the more FR one country hold ,the better its function is, and also people often exaggerate FR's function) and then suggests some practical and feasible policies on the scale management of FR. The advice includes stabilizing the scale of FR, controlling the speed of it's increase, establishing the active management system and enhancing the economic efficiency and the social efficiency of the superabundant FR by the active management and operation.