Management Optimization On China's Huge Foreign Exchange Reserves

With the rapid expansion of China's foreign exchange reserves and annual new reserves, to manage the currency structure of China's foreign exchange reserves has become a hot topic at home and abroad. The fact that the foreign exchange reserves increased year by year, which shows China's economic strength is growing, and also the fruitful results based on China's basic national policy of reform and opening up, especially the policies of opening up.Up to December 31, 2010, the data released by the State Administration of Foreign Exchange shows that, China's official foreign exchange reserves amount to 2847 billion dollars. Meanwhile, according to the statistics from International Monetary Fund (IMF), the dollar reserves in China's foreign exchange reserves has accounted for over 60%. Since 2002, the dollar index has always gone down, especially dropped to historic low-point 71.31 during the financial crisis in 2008, the dollar index has declined by 1/3 between 2002 -2010(dollar index was around 120 in 2002, while was 80 in 2010). Facing the uncertainty of world economic caused by the financial crisis, especially the instability of US economic, making China's massive foreign exchange reserves focusing on the US currency would bring out economic losses and strategic risks. Therefore, it is an urgent and important subject in China's foreign exchange reserves management, it is better to adjust the currency structure of foreign exchange reserves, to ensure that our huge foreign exchange reserves could be increasing the value.In this paper, we choose the currency structure in foreign exchange reserves as research object, analyze the present situation of currency structure in China's foreign exchange reserves, pointing out that the excessive dollar reserves currently has caused tremendous loss of value and strategic risks. According to general principles in choosing reserve currency, and analyzing the world's major economies, we decided the appropriate currency structure in China's foreign exchange reserves. Based on the collection of a large number of economic data, this article builds a new model of reserve structure based on regional economic strength in a brand-new perspective, by evaluating the value of this model, gets a conclusion that the model has great significance, and put forward the structural adjustment programs based on the current size of China's foreign exchange reserves and annual level of new reserves. In the end, the author innovatively puts forward the management principles on structural adjustment, and how to suppress the incensement of China's foreign exchange reserves.