The Plight Of China's Huge Foreign Exchange Reserve Management

In the beginning of 2007, a hot issue in the field of economy and finance–foreign exchange reserves once again caused a great concern. China's foreign exchange reserves reach 1.0663 trillion U.S. dollars the first time, ranking the first in the world.This paper discuss the formation,the negative effects and management of china's huge foreign exchange reserves. It start with the analysis in deep-rooted reasons for the large growth of China's foreign exchange reserves, and huge foreign exchange reserve is not in line with China's long term benefit, it will increase the cost and risk of holding foreign exchange, prick up domestic inflation, and impel the appreciation of RMB. Then introduce some advanced experience of East Asia (Japan, Taiwan and Singapore) in the foreign exchange reserves management ; Finally,give the measures to curb China's rapid increase in foreign exchange reserves and management of China's foreign exchange reserves: Strengthen the control of resources and introduction of talents, cancel the Super National Treatment towards FDI Enterprises, Perfect the RMB exchange rate formation mechanism, increase the use of foreign exchange, and stimulate domestic demand.