Study For The Scale Management Of Chinese Foreign Exchange Reserve

On the background of economy globalization today, as the main part of the International Reserve, the management of foreign exchange reserve is not only related to the ability of one country to adjust the Balance of Payments and keep a stable exchange rate, but also to the healthy and sustainable development of economy. Sufficient foreign exchange reserve becomes the guarantee of international credit and monetary safety for a country. But there are certain costs to hold the foreign exchange reserve, such as opportunity cost and the waste of the resource resulted from over-large scale of it. Fast growth of the reserve may bring inflation, thus cause the pressure of revaluation of its own currency, the restriction to the independent right of the Central Bank currency policy and the negative impact on the adjustment of the industry configuration. Since the reform of system of foreign exchange administration of our country in 1994, the foreign exchange reserve of our county has been increasing very fast. In 1996, the foreign exchange reserve of our county exceeded 100 billion dollars, and became the biggest scale except Japan. In Feb 2006, the foreign exchange reserve of our county exceeded the amount of Japan, and became the biggest scale of foreign exchange reserve in the world. Eight month later, it passed 1000 billion. What is the real reason that caused the reserve to increase so fast? And whether the amount of the reserve is fit for the economic development of our country? What can we do to adjust the scale to fit amount? The thesis will do a further research about these questions, and holds that the international division of labor in the world and the role of China is the real reason of fast increasing of the foreign exchange reserve of our county. By quantitative and qualitative analysis, this paper concludes that the scale of our foreign exchange reserve has surpassed the limit of appropriate scale, and has brought a negative impact. So, we must adopt comprehensive measures on the basis of the source of the fast increasing, to adjust the scale and reduce the negative influence.