Analysis On The Moderate Scale Of Foreign Exchange Reserves In China

Foreign exchange reserve (FR) is the core of the international monetary system and of vital importance in the area of international financial research. It concerns the governments' ability of adjusting balance of payment and stabilizing exchange rate. In the open economic environment, FR is a key index to inspect international economy for a country or district; it is not only an embodiment of macroeconomic operating, but also an important measure for macroeconomic adjusting and controlling. With the economic opening expanding in the world, it becomes an intractable problem that how the domestic economic operating assorts with the speeding up of FR increase. On the basis of FR scale theory, this paper analyses theoretically the FR increase in China about the supply and demand factors, and by introducing the dependent variable FR change, and the independent variables such as Net Export, Balance of Payment, Exchange Rate Fluctuation, Foreign Debt Change, Opportunity Cost, Foreign Direct Investment and Foreign Finance, this paper establishes a model to test the effect on FR increase by these variables. In the next part, this paper establishes another model to calculate the moderate FR scale between 1982 and 2002 in China according to large numbers of historical data. In this model, the independent variables are Export, Economic Opening, Foreign Debt, Foreign Direct Investment and GDP. By comparing the results with the actual FR scale in the same period, this paper concludes that in the two decades the FR scale in China has increased rapidly and large, even in the recent years. The actual value of FR fluctuates around the theoretic value frequently, but the amplitude is small, that is, the increase of FR scale in the two decades in China is reasonable.