The Research Of Optimization Of The Currency Structure Of Chinese Foreign Exchange Reserves

In recent years, China’s foreign exchange reserves have grown fast. In February,2006, China’s foreign exchange reserves achieved$853.6billion, surpassing Japan to be the world’s largest foreign exchange reserves in the world. By the end of2012, China’s foreign exchange reserves remaining had already reached as high as$3.31trillion, on one hand the massive foreign exchange reserves reflect our country’s comprehensive strength, on the other hand also provide the safeguard for our country financial system. But at the same time the rapid growth of foreign exchange reserves reveals that our country’s foreign exchange reserves management system need to be updated, particularly when facing huge foreign exchange reserves, China need to change the management strategy.This article is precisely based on this, taking "the research of optimization of the currency structure of foreign exchange reserves of China—the empirical analysis based on the theory of asset portfolio" as the selected topic. In the current context of massive foreign exchange reserves, by leveraging on GARCH model estimate the major monetary assets yield volatility in China’s foreign exchange reserves, and then use various currencies yield volatility to estimate the VaR of different currencies, finally, measure out the optimal combination of Chinese foreign exchange reserve currency through the portfolio model, when minimizing the risk of Chinese foreign exchange reserve currency under different target yields.After achieving the optimal combination of Chinese foreign exchange reserve currency, with the combination of our country’s current economic situation, from the different analysis angle of view, make out the relevant policy recommendations:Including reduces US dollar proportion suitably, and increase the proportion of Japanese Yen and the euro holdings; Implement the multi-level structure of the foreign exchange reserve management; Use the foreign exchange reserve advancement to promote the internationalization of RMB positively. Hoping that this article can make contribution to the structure management of our country’s foreign exchange reserves.