Study Of Foreign Exchange Reserves Management In China

In the end of2010, China’s foreign exchange reserves reached$2.85trillion. There isan increase of448.1billion compared with the previous year, and the average annualgrowth rate has reached37%in the past five years. From a global scale, China’s foreignexchange reserves accounted for30percent of global foreign exchange reserves, which hasranked first for four consecutive years. Massive foreign exchange reserves could play anextremely important role in regulating the BOP, stabilizing exchannge rate, enhancing thecurrency’s credit and resisting financial risks. But the huge foreign exchange reservesmean the high management costs, also a waste of resources, as well as the passive increasein money supply caused by increasing foreign exchange. How to manage massive foreignexchange reserves is an important mission our government must complete.Under this context, the article mainly researches the currency structure managementof the pure-foreign reserves and active investment management of pseudo-foreignexchange reserves. The article is divided into six parts. The first part is the introduction.The second part reviews the related theories and previous literature. Third part introducesthe current status of China’s foreign exchange reserve management, and analyzes foreignexperience to get some inspiration for our China. Part IV and Part V maily study theoptimization of pure foreign currency reserve and pseudo-foreign currency reserve.Andpart VI is the conclusion.The conclusion tells us that the management authority must adjust the weght of eachcurrency and the structure of the dollar-denominated assets, and diversify investments.This is of far-reaching significance to improve the return of foreign currency reserve assets,and promote healthy economic development.