A Study On Structure Management Of China's Foreign Exchange Reserves

The foreign exchange reserves of China is growing faster in recent years. By the end of year of 2006, its scale has reached 1066.3 billion US dollars, becoming the TOP 1 country, which has the biggest amount of reserves in the world. For China, how to manage the huge sum of foreign exchange reserves on the structure, has become the most urgent problem. This dissertation, by introducing the theory of structure management on foreign exchange reserves, and lessons from overseas, deeply analyzes the present situation and problems of our country's structure management on foreign exchange reserves, then offering certain corresponding measures for the improvement. The full text can be divided into three main parts:Part one (chapter 1, chapter 2) briefly introduce the structure management of the foreign exchange reserves in theory. It includes the target, principle of management on foreign exchange reserves, the meaning of structure management; model of portfolio selection, Heller & Knight, and Dooley in currency composition; the determinant factors on the currency composition and portfolio selection. And at last of this part, based on the frame of risk-benefits model, we research further on the optimization structure.Part two (chapter 3, chapter 4) analyzes the experience of foreign countries on how to manage its foreign reserves. We find out that all these countries under our investigation pay more attention to the liquidity of foreign exchange reserves. In recent years, as the request of profitability having been emphasis more and more, some nations have established the national foreign exchange investment companies one after another for the active management, which can be the good examples for our future practice. While compared with China's present situation, although official data is unavailable, we still can get some information and found the following problems: US dollars stands higher share in the currency composition, which would cause higher foreign exchange risk; the low income phenomenon of the portfolio of foreign exchange reserves earning is also outstanding. All these problems need to be adjusted urgently. Part three (chapter 5) aims to find out the existent problem of our country's structure management on foreign exchange reserves. Based on the preceding paragraphs analysis and countries experience apocalypse, the writer puts forward the following policy suggestion: (1) The target of structure management needs effective adjustment in the new era, which should take the liquidity as the principal target, take the profitability as the important target in the near future; (2) To optimize the currency composition, we should carry out gradual dispersion strategy and dynamic adjustment on currency structure; (3) To optimize portfolio of foreign exchange reserves, we should strengthen on the rating management for improving the profitability. In the end, this dissertation researches further about strategic investment of foreign exchange reserves, and putting forward the related principles and regulations.