| Foreign exchange reserve management is crucial to the country's microeconomic financial management, which is regarded as an important way to safeguard security of the economics and maintain balance of international payments. The growth of the foreign exchange reserve has always been an issue of great contention at home and abroad.By the end of 2010, the foreign exchange reserve has reached 28473.38 billion US dollar, China has the world's largest number of foreign exchange reserve in the world. Although the large scale of the reserve can cover the payment of the International trade and has sufficient ability to take risks, too much foreign exchange reserve means the imbalance of the external economics, and also causes the internal economic fluctuation, such as boosting the money supply, inflation, and instability of the domestic monetary policy. From an economic perspective, too much reserve causes expected inflation, the fluctuation of the foreign exchange rate, the surge of the speculative money. And from the political point of view, the large reserve and "double surplus" result in the growth of the Trade protectionism and antidumping cases. Some countries leagued together to force China to appreciate RMB. In a world, too much reserve can cause various costs. The research has already transferred from whether it is sufficient or not to how to decide the optimum scale, minimize the costs and maximize the revenue.Chapter 1 introduces the background of the topic and the research at home and abroad. In Chapter 2, some typical theoretical models are described and analyzed in detail. Chapter 3 describes the history of reserve in different decades, analyzes the reasons and effects, especially the negative effects of the large reserve. In the fourth chapter, the extended model is used to calculate the optimum scale, which is compared to the actual value. In the last chapter, with learning from other countries it puts forward some corresponding suggestions. |
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