China's Central Bank Foreign Exchange Write-off Measures Study

Since 1997 our country's foreign exchange reserve has been increasing continuously and rapidly, especially the speed was about hundred billion dollar one year in the past several years. We can foresee that, because of our better economical position than others and anticipation of RMB's appreciation, our foreign exchange reserve will still keep very rapid increasing speed in the future period. In our foreign exchange management system, central bank becomes only actual foreign exchange supplier and demander, increasing of foreign exchange reserve is result of purchasing foreign exchange by the People's Bank of China, rapid increasing of foreign exchange reserve makes money base increase mass that central bank put in, which must impact our money policy. Now our country takes quantity of money supply as medium target of money policy, to keep quantity of money supply steady and achieve policy target, central bank must adopt measures to sterilize the plus of money base made by increasing of foreign exchange. Now our central bank's sterilizing measures conclude open market operate, rediscount and re-loan, with continuous increase of foreign exchange reserve and continuous sterilization, the measures cannot achieve sterilizing target. Our foreign exchange reserve will increase continuously in the later several years, it is hard to achieve sterilizing target with traditional measures of our central bank, so we must construct available and durative sterilizing measures system to eliminate adverse influence to money policy and our economy, and make our economic development more healthily.In foreign countries, because they are facing or faced the same problem with us, they have made a lot of research and get a lot of production, brought forward basic sterilizing policy and measures system. Because of adverse influence of these measures and confining terms and special conditions of our country, we cannot use all measures in our country. Now our country have not papers to discuss sterilizing specially, only have some papers to discuss open market operate and rediscount and re-loan policy and issuing central bank's note.In my paper I analyze "Balance of Payment" and "Balance Sheet of Monetary Authority" and adverse influence of increasing of foreign exchange reserve firstly. Secondly I introduce foreign main sterilizing measures and analyze probability of using them in our country. Thirdly I analyze reasons why present measures cannot achieve targets, so we must construct durative sterilizing system. At last I put forward short-term and long-term resolving schemes in basis of front analyses.My paper has four parts.First part lucubrates status quo of foreign exchange reserve of our county, existent main problems include increasing more rapidly of size and inconsequence of frame, at same time analyze adverse influence to FX rate system and money policy and macro-economy of our country.Second part introduces main foreign sterilizing measures and deeply discusses un-durative of our present sterilizing measures, then get conclusion that we must construct durative sterilizing measures system.Third part puts forward short-term and long-term resolving schemes to cast off sterilizing puzzle dom of our central bank on basis of front analysis.Fourth part gains several conclusions of the paper.Because my knowledge confines me, my paper almost has not technical innovation. But it has some method innovation, concluding analyzing problems from angle of money policy and using lots of compare analysis to sustain my conclusion.My paper must have many errors and improper, please comment and correct them.