The Research Of China’s Value Management In Foreign Exchange Reserves Based On The Viewing Angle Of Strategic Profit

Since2003, China’s foreign exchange reserves are growing dramatically. By the end of September2010, the official holding of foreign exchange reserves reached26483.03billion U.S. dollars, still the first in the world scale. Therefore the government face a serious problem to manage such a huge number of foreign exchange reserves to ensure the healthy development of China’economy. Now, most domestic scholars focus their study on traditional foreign exchange reserves management goal i.e. safety, liquidity and profitable from the prospective of micro financial index analysis, which neglected its strategic value to our country’s economy in the macroscopic level. July2005, China began to implement a managed floating exchange rate regime based on market supply and demand with reference to a basket of currencies. Since then, the appreciation pressure of RMB growing bigger. In order to maintain a reasonable appreciation speed of RMB and prompt the stability of macroeconomic environment and financial markets, PBC takes foreign exchange intervention frequently to regulate and manage RMB exchange rate. These actions maintain a stable appreciation speed of RMB exchange rate and promote a continuous growth of foreign trade. So we should involve such indirect benefit into the traditional foreign exchange reserves management system to have an much more objective and accurate understanding to foreign exchange reserves.In this paper, both theoretical and empirical analysis has been done on the side of ERER theory to calculate the indirect benefit of foreign exchange reserves through the difference between RMB’s real effective exchange rate and equilibrium real exchange rate. According to the result of the analysis, it gives the policy recommendations which can optimize our country’s foreign exchange reserves structure.