A Study On The Foreign Exchange Reserve Growing Control Validity Of China's Current Monetary Policy

The foreign exchange reserve is a comprehensive variable, whose amount excessively has a significant influence to a country economy. When the foreign exchange reserve grows in the reasonable scope, it has the very great function to the economic development. But, on the other hand, the fast growth of the foreign exchange reserve also brought some negative influences to our economic development. To some extent, it makes our economy growth depend more and more on the international capital, which reduces the safety factor of our economy. It increases the demand of RMB, and brings great pressure to the appreciation of the RMB exchange rate.At the beginning, this article talks about the reason of the increasing of the foreign exchange reserves, which emphasis on the export trade surplus. After analyzing the influence of the foreign exchange reserves to the monetary policy , the article found that, at the present time, the RMB counterpart of foreign exchange reserves have been the main channel of our central bank putting the base currency into economy, and cause the capital fluid surplus in our economy. The fluid surplus greatly weakens the independence of monetary policy, and makes it distorted. After that, the paper analyses China's current monetary policy validity in the point of view of FDI, because it is the main cause of export trade surplus.The kernel of this article is to carry on the real diagnosis to the current monetary policy and the two kind of FDI—export oriented FDI and market oriented FDI, by using the an empirical research method, so that to probe into the validity of our monetary policy. The analysis result shows that the current monetary policy will promote more export oriented FDI but less market oriented FDI, so its effect of controlling the fast growing foreign exchange reserve is limited. Finally, based on the conclusion, the article put forward the corresponding proposal.