The Research On The Proper Level Of Chinese Foreign Exchange Reserve

China's foreign exchange reserve has increased greatly in recent years: 609.9 billion dollars in 2004, 818.9 billion dollars in 2005, ranked the first in the end of 2006 when it reached 1,066.3 billion dollars, and 1,528.249 billion dollars in 2007. It has never been reached such a high level as "1000 billion dollars", it accounts for 20 percent of the whole foreign exchange reserve in the world, it is about 45 percent of china's GDP in 2006, and it doubles the total amount of money in the hands of the people. Be faced with such a large scale of foreign exchange reserve, we have to have a thorough thought on the problem how much is the proper level of foreign exchange reserve.There is not a standard on the proper level of foreign exchange reserve, neither in practice nor in theory. The threshold of foreign exchange reserve is accepted internationally, but all countries cannot reach a agreement on the ceiling of it. From the traditional view of point, the level of foreign exchange reserve should not less than for 3-4 months import. After Asian financial crisis, it was proposed that it should not be less than short-term foreign debt. But taking import, debt, the control of capital item, and china particular situation into consideration, we can not get a conclusion on the proper level of foreign exchange reserve.In addition, in china foreign exchange reserve is held by the state, which holds about 68% of the whole country. But in advanced countries, it is held by the people. In UK, the government only holds 43 billion dollars, but the people holds about 99.5% of foreign reserve. In whole the level of foreign exchange asset reaches 8,280 billion dollars, which is much higher than it in china.Although there is not a final conclusion on the proper level of foreign exchange reserve in china, but the negative affection on china economy of huge level of foreign exchange reserve is becoming more and more serious: making the problem of inflation worse; bringing more pressure on RMB appreciation; leading to low efficiency of capital and resource; all above affection will slow the speed of national economy development. This thesis systematically analyzes foreign and domestic theories on proper level of foreign exchange reserve, thoroughly studies Chinese proper level of foreign exchange reserve with consideration of Chinese actual situation, constructs a model on optimal scale of Chinese foreign exchange reserve, and at last, brings up some policy advices on foreign exchange reserve management.This thesis can be divided into four parts: part one describes the background of this thesis, and reviews papers on foreign exchange reserve; part two introduces basic concepts of foreign exchange reserve and proper level of it, reviews the history of Chinese foreign exchange reserve , and talks about the affection of huge scale of foreign exchange reserve; part three analyzes Chinese proper level of foreign exchange reserve by use of different models; part four brings up some advices on foreign exchange reserve management.