Research On The Proper Size Of China's Foreign Exchange Reserves

After China's entry into WTO in 2001, China's economy has being maintained a fast and stably growing momentum, and"the double surplus"of current account and capital account in balance of payment, resulted in sharply accumulative foreign exchange reserves. In the end of March, 2007, the total number of reserves has hit the record high US $ 120.20 billion, the top one in the world. In this situation, the problem of the proper size of China's foreign reserves has become one of major topics in the discussion of the economics research circle.Foreign exchange reserve is the most important part of international reserves, and it exerts an important influence on maintaining the BOP, intervening the FX market in supporting the exchange rate, serving as the guarantee of international liability and strengthening the international status of China etc. In addition, foreign exchange reserves have a close relationship with the macro economy, concerning the internal and external economic balance and the efficiency and effectiveness of economy.Therefore, how to calculate and define the proper size of foreign exchange reserves, how to understand the situation of China's FX and reasons and the analysis of advantages and disadvantages of excessive FX and how to solve these problems and keep China's FX size in a proper level, will bring a deep thinking and positive analysis and discussions in this subject.