A Study Of China’s Foreign Exchange Reserve Against Global Financial Crisis

In recent years, China’s foreign exchange reserves have been increased dramatically. The amount of huge reserves, now more than 2.44 trillion U.S. dollars, remains to be the highest in the world. It benefits improve regulation of China’s external payments and balance of payments, intervention in foreign exchange markets, while such a large number of idle resources of bank reserves may also tend to pose a serious, urging and unprecedented challenge to China’s foreign exchange reserve utilization feasibility, especially against the context of the existing global financial crisis.Like in other countries with rapidly increased and huge numbered foreign exchange reserves, we should begin to pay immediate and more attention to China’s active management of foreign exchange reserves. For us too, a renewed understanding of traditional management aiming at the reverses’ liquidity and security is in urgent need. In so doing, we are to explore how to further improve the management mechanism of China’s foreign exchange reserves, to keep in pace with the worldwide ever changing financial situation. And to be more exact, enough attention and discussion should go to China’s foreign exchange reserve utilization feasibility and corresponding measures and strategies.This thesis falls into six parts. The first part features an introduction to the relevant literature and findings of domestic and foreign scholars and experts on state exchange reserves, currency structure. The second part is about the active management of foreign exchange reserves. The third part recalls the growth process of China’s foreign exchange reserves, and discusses the need for active management of foreign exchange reserves. The fourth part is a discussion summary of the optimal level of foreign exchange reserves for China facing the global financial crisis. The fifth part deals with a sub-analysis of China’s foreign exchange reserve management in the context of the current financial crisis, its new challenges in particular. The last part highlights a detailed discussion, in the context of the financial crisis, of China’s foreign exchange reserves utilization feasibility, corresponding countermeasures and strategies.This paper particularly tries to combine theories with practice in its analysis. It features a discussion of China’s existing problems in its foreign exchange reserve management, and the impact of global financial crisis upon China’s foreign exchange reserve utilization feasibility. The discussion is done primarily through a comparative analysis of large amounts of data, drawing on the success of the international foreign exchange reserves management experience and new trends. It is also the author’s hope that this paper’s findings will help to offer a new angle to observe and study the active management of foreign exchange reserve, in an addition to some helpful countermeasures dealing with the ever changing situation of the global financial market...