The Influence Of Increasing Foreign Exchange Reserves To Monetary Policy In China

In the last few years, Foreign exchange reserves (FER) in China is increasing largely, and it exceeds Japan's in February of 2006, and becomes the first in the word. Up to the end of 2007,the total amount of foreign exchange reserves has already amounted to about 1530 billion US dollars. The large amount of FER shows that our country's power having been strengthened,it has the very great function to the economic development,but the fast growth of foreign exchange reserves also has brought some negative influences to our country's economic development.On one hand, it may improve our credit ability and the trust to RMB in the world; it may not only attract more foreign fund to our country, but aslo promot the development of our economy.On the other hand,with present exchange control system,the central bank is the last buyer,so the mirror image of foreign exchange reserves is increasing with the FER increasing, the RMB counterpart of foreign exchange reserves are the main channel which is our country Central Bank putting the base currency into economy. It decreases the effect of monetary policy and weakens the independence monetary policy. FER in China is increasing sharply, and has become the significant factor of restricting the validity of monetary policy.This article analyses the present situation of FER , talks about evolution process of our country foreign exchange reserves,the reason of the increasing of foreign exchange reserves,and carries on the summary of the foreign exchange reserves research. After that,the article introduces the influence of the foreign exchange reserves to the monetary policy. It analyses our country's foreign exchange reserves restriction and mechanism to the monetary policy. Finally,based on the conclusion,it puts forward to the corresponding proposal and the measurement to FER in China.