The Empirical Research Of Optimization Of The Currency Structure Of Foreign Exchange Reserves Of China

As of March 2011. China's foreign exchange reserve reached 3.04 trillion U.S. dollars, the overall size of the world, accounting for 30% of total world foreign exchange reserves. With the continuous depreciation of the dollar, the debt crises in Europe and the U.S. debt ceiling issues, how to manage the huge foreign exchange reserves has become a major problem of China's Administration of Foreign Exchange.As the currency structure of China's foreign exchange reserves are not announced, which makes the academic study of foreign exchange reserves restructuring and risk management a certain amount of disorder, so this article do an overall consideration of the structure of China's foreign trade, the foreign direct investment structure in China, the International Monetary Fund in developing countries foreign exchange reserve structure and trends. China's foreign exchange reserves over the years and the foreign holdings of us securities and other publicly available data to speculate on the structure of China's foreign exchange reserves.Academia widespread use of the RMB exchange rate data or deposit rates to build a simple Markowitz portfolio to calculate the optimal currency structure. it exists two problems, first of all. the currency structure of foreign exchange reserves need to meet our demand for foreign currency and to consider the world foreign investment market:Secondly. foreign exchange reserves can not be converted into yuan. Therefore. this article fully takes into account foreign exchange constraints, and the level of interest rates and the return of converting into dollars to calculate the rate of return and risk. In constraint-based, using Markowitz portfolio theory for optimal structure of foreign exchange reserves is U.S. arounded at 52%. the euro at 32% level, the yen at 1% level and the pound at 15% level. Therefore, to optimize the currency structure of foreign exchange reserves, increase revenue and reduce risk, China's foreign exchange reserves should reduce the U.S. dollar and the yen, increase the euro and sterling reserves.China's foreign exchange reserves accounted for about 30% of total world foreign exchange reserves. Because a large proportion of China's foreign exchange reserves of the world, so we can study the changes in the structure of the world's foreign exchange reserves to analyze the changes and adjustments of China's foreign exchange reserves as well as the internationalization of RMB issue.From the structure point of view, the world's foreign exchange reserves in U.S. dollar decline, but still accounted for the major part; The euro on the rise. nearly one-third. sterling and yen accounted for less. which pound the rise. the yen has declined; other currencies currency reserves are on the rise.As to the relationship of proportion of the world's foreign exchange reserves and the various factors, from the results of individual-based analysis and cointegration panel data model, the first order lag of the world's foreign exchange reserves, national GDP, import and export, the expected of real effective exchange rate,10 years government bond interest rates and bond issuance all have a significant impact on the structural changes of world's foreign exchange reserves. This shows that the economic strength, international trade and financial markets are the main factors affecting the world's foreign exchange reserves, and also the main factors affecting the monetary status in the world. For China's huge foreign exchange reserves, we should reduce the dollar and the yen foreign exchange reserves, increasing foreign exchange reserves of euro and sterling, while increasing the currency's foreign exchange reserves in emerging countries.For the fact of Europe debt crisis and the U.S.debt ceiling issues, China's foreign exchange reserves investment should not only focus on the actual yield spread, but also focus on the country's economic strength, bond issues and financial stability. As for the internationalization of the RMB, the Chinese should vigorously develop the economy, international trade and financial markets, especially in the international bond market. Direct issue dollar-denominated international bonds will reduce pressure on the management of large dollar reserves, while the Panda bonds issues will increase the Yuan's position in the world foreign exchange reserves, and make the Yuan gradually become world currency.