For The Large-scale Use Of Foreign Exchange Reserves To Buy Equity Assets Questioned

The best scale of foreign exchange reserves and the effective management of the foreign exchange market have a great importance to a country. Because of the "double surplus" in a long time, China has accumulated a large number of foreign exchange reserves in recent years. However, the high proportion of foreign exchange reserves invested in the U.S. Treasury bonds and the poor yield of this investment raise dissatisfaction in Chinese. So the advice of actively managing the foreign exchange reserve is more and more popular. Someone advises that we can use our foreign exchange reserves to invest in important resources that we need a great deal. In this way, we can both secure our needs of these resources and increase the value of our foreign exchange reserves. But when it comes to the emerging economies, the foreign exchange reserve management principle should be safety and liquidity because in the time of financial crisis, emerging economies usually face the risk of capital flight. Prices of these resources usually suffer a severe decline in the financial crises so they can’t meet the need of liquidity in the crises. Using the foreign exchange reserve to invest in these important resources should not be the main means of foreign exchange reserve management.