A Study On The Appropriate Scale Of China’s Foreign Exchange Reserve

In the recent years, with the rapid development of economy, China’s foreign exchangereserve scale is also expanding rapidly. Since2006, China became the largest holder offoreign exchange reserve, at the end of2011, China’s foreign exchange reserve had anotherhigh record, broke the3000billion dollars. Generally speaking, the scale of foreign exchangereserve is the interaction results of the foreign exchange supply and foreign exchangedemand.The theory believes that the Agarwal and the modified model can measure of foreignexchange reserve in developing countries well.In reference to the previous researches, this paper selects economic statistical data from1982to2011, the paper use ratio analysis method, cost and profit analysis method todetermine the scale of China’s foreign exchange reserve. At the same time, foreign directinvestment, external debt balance, export, import, exchange rate system of RMB per year asindependents and foreign exchange reserve as dependent to do empirical analysis. The studyfind that now China ’s foreign exchange reserves have been beyond the reasonable scope, anddebt and exports are the important factors to influence the size of foreign exchange reserve.Therefore, we can take appropriate measures to limit the scale of China’s foreign exchangereserve so as to improve the management level and income of China’s foreign exchangereserve.