China Foreign Exchange Reserve's Scale And Management

On the baekground of economy globalization today, as the main part of the intemational reserve,the management of foreign exehange reserve is not only related to the ability of one country to adjust the balance of payments and keep a stable exhange rate,but also to the healthy and sustainable development of economy. Sufficient foreign exehange reserve becomes the guarantee of intemational credit and monetary safety for a country. But there are certain costs to hold the foreign exchange reserve, such as opportunity cost and the waste of the resource resulted from over large scale of it. Fast growth of the reserve may bring inflation,thus cause the pressure of revaluation of its own currency, the restriction to the independent right of the central bank curreney policy and the negative impact on the adjustment of the industry configuration.Since the reform of system of foreign exehange administration of our country in 1994, the foreign exchange reserve of our country has been increasing very fast.In 1996, the foreign exchange reserve of our county exeeeded 100 billion dollars,and became the biggest scale except Japan. In Feb2006,the foreign exchange reserve of our country exeeeded the amount of Japan, and became the biggest scale of foreign exchange reserve in the world.Eight month later,it Passed 1000 billion. What is the real reason that caused the reserve to increase so fast?And whether the amount of the reserve is fit for the economic development of our country? What can we do to adjust the scale to fit amount?The thesis will do a further research about these questions,and holds that the intemational division of labor in the world and the role of China is the real reason of fast increasing of the foreign exchange reserve of our country. By quantitative and qualitative analysis,this paper concludes that the scale of our foreign exehange reserve has surpassed the limit of appropriate scale,and has brought a negative impact.So,we must adopt comprehensive measures on the basis of the source of the fast increasing,to adjust the scale and reduce the negative influence.There are seven parts in this paper. The first chapter is the introduction in which the background and the meaning of choosing the topic,research approaches are introduced.The second chapter,I reviewed the history of China's foreign exchange reserves from its shortage to its abundance stage,and analyzed the reasons to our high foreign exchange reserves.Chapter three is the analysis of the scale of optimal foreign exchange reserve.I In chapter four,I made a introduction of cuurent state of foreign exchange and the problems.In chapter five,I analyse Japan's successful foreign exchange management.In chapter six,I give some better suggestions about our country's foreign exchange management.In the end,I made a summary of the whole paper.