The Comparative Research On The Management Of Chinese And Japanese Foreign Exchange Reserve

China and Japan are the biggest two economies in Asian, both of which have the large amount of foreign exchange reserve. In 2006, China surpassed Japan to become the country that has the world first great foreign exchange reserve. At the end of 2009, the remaining sum of China's foreign exchange reserve achieved to 2,390 billion US dollars. The high quota of foreign exchange reserve means it must pay the high quota of the cost: The large amount of foreign exchange reserve makes the unilateral anticipation of RMB's revaluation strengthen unceasingly, and then causes the overseas hot money's short term investment pass in and out of China in abundance. How to manage such huge foreign exchange reserve and cause its revaluation is a new topic suspending in front of Chinese people. Japan, as the most developed country in Asian, has the large amount of foreign exchange reserve for a long time, so its rich experience in managing and using the foreign exchange reserve is worth studying and using for reference by China that is still at the developing phase. This article reviewed the origin of China's and Japan's foreign exchange reserve in different times, through the form of the data and the graphs summarizes the change tendency of China's and Japan's foreign exchange reserve and contrasted the getting and loses in the aspect of managing the exchange. Finally, obtaining the enlightenment through studying and referencing the Japan's foreign exchange reserve's managerial experience, then through combining with the senior scholars' experience, providing some new mentalities for China's foreign exchange reserve management, and putting forward the corresponding policy proposal.The full text is divided into five parts. The first part is the introductory remarks, briefly introducing the foreign exchange reserve's meaning, giving the selected topic's background, and proposing the question. Then there is the related literature summary, introducing the domestic and foreign scholars'research results in the moderate scale and the management structure of the foreign exchange reserve and the Japan's foreign exchange reserve's management.The second part, according to the different times, introduces the China's foreign exchange reserve's origin and causes by stages. The development history of China's foreign exchange reserve is divided into four stages. The first stage was from the establishment of new China and before the reform and open. In this time, the China's foreign exchange reserve's scale was very small and the development was slow; The second stage was from the reform and open and before the foreign exchange system's reform, and this time's characteristic was that the foreign exchange reserve's scale had a growth, but it was unstable and the fluctuation was big; the third stage was from the foreign exchange system's reform to the year of 2000. In this time, the China's foreign exchange reserve grew relatively steadily; the fourth stage was from 2001 to 2009. In this time, China's foreign exchange reserve grew fast. About the origin and the causes of China's foreign exchange reserve's grow, I think there are mainly three reasons: The first is"the double favorable balance"of the current project and the capital project; the second is the US dollar's depreciation and the RMB's revaluation anticipation; the third is the China's compulsion collect and sale exchange system as well as the control of the capital and monetary project.The third part, first reviews the Japan's foreign exchange reserve's historical development, broadly introduces the Japan's foreign exchange reserve's development process from 1965 to the currency. Then, the origin and the causes of the Japan's foreign exchange reserve are summed up into two points: The first is the Japanese government's large-scale intervention for the foreign exchange market to maintain the favorable balance of the current account and the institutional factors, the second is the unsuccessful of the Japanese yen's internationalization.The fourth part, from the two aspects of the system management and the investment management, compares with the difference of the China's and Japan's foreign exchange reserve's management patterns and discovers the insufficiency. In the aspect of the system management, Japan's reserve management system is constituted by the Financial Province and the Bank of Japan. The financial province plays the decision-making leading role, and the Bank of Japan is the implementing agency. This kind of institutional arrangement that the policy-making management and the operation management are separated manifests the decentralization thought, implementing the multi-dimensional management system. Each constituent is influenced and restricted mutually. The policy-making organ does not hold a concurrent post of the actual steering function, and the strategic decision and the strategy execution are separated suitably. In China, as the Central Bank, the People's Bank of China, resting on"the Law of People's Bank of China ", implements the management to the foreign exchange reserve through the subordinate body"National Foreign Exchange Bureau". The Finance Ministry (to be equal to the Japan's Financial Province), is also in the foreign exchange reserve's management system, but its function is not big. Although this kind of sole level reserve management system has certain flexibility, but the strategic management and the operation management as well as the supervision management have not been separated, causing the systematic risk of the foreign exchange reserve's management reduce difficulty. Moreover, the People's Bank of China not only considers the monetary policy but also considers the exchange rate policy, often entering a dilemma region. In the aspect of investment management, because having the enough foreign exchange reserve, Japan does not need depend upon the reserve assets' capital operation to rise in value, and its guard for the foreign investment risk's preventive motive does not occupy the most main status. Generally speaking, Japan's foreign exchange reserve management follows the principle that the security is placed in the first place, the fluidity is placed in the second place, and the profitability is placed in the lowliest place. Its foreign exchange reserve's function is to maintain the stability of the Japanese Yen exchange rate through the frequent intervention on the foreign exchange market. In China, the priority target is to safeguard the sufficient foreign exchange reserve to satisfy the country's need, and basing on this to pursue the reserve assets'increment. In China's and Japan's foreign exchange reserve, US dollar property occupies the major part. The US dollar property concentrating too much and lacking the flexibility cause the two countries'reserve assets influenced by the US dollar's depreciation. Moreover, China is the investor of the American national debt and the organization bond. As the long-term bond, the American national debt and the organization bond are very sensitive to the risk of the long-term interest rate's rise. If the US dollar bond market price falls, it will cause the reduction of the China foreign exchange reserve property's market exchange value, namely the book loss. When the financial crisis happens, if underselling the American national debt and the organization bond to exchange the cash, it will cause the bond's market price correspondingly drop and the foreign exchange reserve will be lost.The last part includes the enlightenment and the policy suggestion. The enlightenment mainly as follows: First, the foreign exchange reserve's management must be target-oriented and have compatibility; Second, the key solution of the balance of international payment is placed on the improvement of the trade's foreign exchange earnings; Third, the country should have the enough foreign exchange reserve property, thus grasping the initiative of the reform and the macroeconomic regulation and control; Fourth, we should definite the foreign exchange reserve scale according to the economic situation's development. The suggested policies are also divided into four points: First, adjusting the economic policy, optimizing the export structure, improving the trade's condition, relaxing the import's control, increasing the import, and balancing the trade's revenue and expenditure. When introducing the foreign capital, we should positively guide the foreign capital's flow, raise the foreign capital's technique content and inflow quality; Second, expand the domestic demand, reduce the foreign degree of dependency, specially increase the farmers' income in the poor areas, enabling them have the ability to expense. Moreover, the government should pay attention to increase the public products'supply; third, deepen the reform of the exchange control system, perfect the legal arrangement and the organization arrangement, establish the perfect related laws and regulations, to clear the principle of using the foreign exchange reserve, the investment trend and how to distribute the income. Additional, in the aspect of the internal and external monitor to the foreign exchange, connecting to the international trail connection, enhancing the transparency, simultaneously establishing the risk early warning system; Fourth, positively implement the foreign exchange reserve's investment strategy. For example, making the foreign exchange reserve's operating mechanism multiplicative, promoting the various departments' information communication, optimizing the foreign exchange reserve's assets structure, reducing the US dollar foreign exchange reserve's share, increasing the Euro, the Japanese Yen and other foreign exchange reserve's share and so on.