Research On The Risk Management Of The Foreign Exchange Reserve Of China

At present, the flow of international capital is accelerating. Although this facilitates the development of the world economy, it also makes the economy to be more volatile and the financial crisis to occur more frequently. Since the Asian financial crisis in 1997, the discussions on how to effectively manage the foreign exchange reserve have attracted more attentions in the economics, with the attention to the functions of the foreign exchange's avoiding the financial crisis and intercepting the fluctuation of the foreign exchange rate. The purpose of foreign exchange reserve is not only to ensure the payment for the import, but also to prevent the negative effect of the capital flow, to stabilize the domestic foreign exchange rate and to improve the confidence of local and foreign investors. The discussions on the sufficiency of foreign exchange reserve and its effective management have become the major research topics in the international finance field.The foreign exchange reserve has been developed very fast since the reform of the system of the foreign exchange management in 1994 in China. The total amount of reserve has surpassed 100 billion US dollars in 1996. In the end of 2005,it has added to 818.8 billion US dollars. In February 2006, the total amount of reserve has prevailed to Japan and China has held the largest quantity of the foreign exchange reserve in the whole world. But for any country the more the better is not always...