Study On The Impact Of China's Huge Foreign Exchange Reserves On Macroeconomic In Our Country

Foreign exchange reserves are important areas of international financial problem. For any country in the modern world,foreign exchange reserves are essential and vital economic resources.The number of foreign exchange reserves is a very import performance of the country's comprehensive national strength.The high foreign exchange reserves play a positive impact on our macroeconomic in our country,but it also brings some negative impact.Based on thesis about high foreign exchange reserves of some foreign countries,the paper had tried to propose some operational recommendations.The paper has the following six parts.The first part is preface,which includes the introduction of the thesis research background,research significance,as well as the status of research and the dissertation research purposes and methods.Until September 2008,the balance of our country's foreign exchange reserves reached 1.9056 trillion U.S.dollars,ranking first in the world.It is of great significance to Study on the impact of China's huge foreign exchange reserves on the macro-economy in our country,which not only can help us to Learn the extent of the high foreign exchange reserves' impact on China's economy. as well as to offer some suggestions for macro-economic managers.Research at home and abroad,the paper wants to achieve three objectives:First of all,study the influential extent of China's huge foreign exchange on China's macro-economic, including China's macro-economic variables,such as,economic growth,money supply,inflation,foreign economic activity and so on.Secondly,study of macro-economic effects of high foreign exchange reserves,explore the macro-control mechanism of foreign exchange reserves,and also give some suggestions for macro-economic managers.Thirdly,give some operational propositions in reference of foreign high foreign exchange reserves management practices and experiences.The second part is the theoretical analysis of the macro-economic impact of high foreign exchange reserves.Foreign exchange reserves refers to the foreign exchange part in the international reserve assets held by the Government,that is the government's debt expressed in foreign currency which can be exchanged by foreign currency assets at any time.Generally speaking,the main sources of foreign exchange reserves for a country include:balance of payments surplus,the foreign exchange proceeds gained by the Government from international credit,the foreign exchange gained by the central bank intervention from the foreign exchange market,the internal conversion of the international reserves by the sale of gold and so on.According to the source of the structure of foreign exchange,foreign exchange reserves can be divided into claims of foreign exchange reserves and debt reserves,and the ratio of the two reflects the quality of a country's foreign exchange reserves.The main function of foreign exchange reserves lies in the following areas:Firstly,adjust the balance of payments,maintain the capacity to pay external exchange;secondly, intervene the foreign exchange market and stable the currency exchange rate;thirdly, improve the external financing capacity and protect the national credit.However,the foreign exchange reserve is not the more the better and it also has a reasonable level. A country's foreign exchange reserves is not a definite value at an appropriate scale in real life,and should be a region-wide,in which it has its upper and lower limits. Beyond this range,we can consider the country's foreign exchange reserves of foreign exchange reserves are high.High foreign exchange reserves have a close relationship with the base money and money supply,interest rates and exchange rates and price levels,and it has notable impact on the overall macro-economy of the country.The third part is about the current status and reasons for our country's high foreign exchange reserves.This part analyses of the formation of our country's high foreign exchange reserves.According to the scales and the results of reserves,China's foreign exchange reserves have the following characteristics:first of all,the ultra-high-speed growth of the total amount and the more and more large scale; secondly,the structure of currency's foreign exchange reserves is single and has over-reliance on dollar reserves.The causes of the high foreign exchange reserves have the following aspects:first of all,the policy reasons,that is,the country's macroeconomic policy implementation;secondly,the international balance of payments of the "double surplus" of our country is the main reason for the formation of the high foreign exchange reserves;In addition,foreign exchange management system is the institutional cause of the rapid growth of China's foreign exchange reserves.Based on Triffin law,we can see that our country's foreign exchange reserves have been high or too high. In the fourth part,the paper analyses the macroeconomic impact of foreign exchange reserve on macro-economy of our country.High foreign exchange reserves of our country have a positive impact on macro-economy:first of all,the high foreign exchange reserves increased our country's ability to regulate the balance of payments; secondly,high foreign exchange reserves enhanced the ability of China's macro-control;thirdly,the high foreign exchange reserves increased our country's international credit rating and improved its terms to attract foreign investment and external financing;fourthly,the high foreign exchange reserves promoted the implementation of the RMB exchange rate freely.However,the amount of foreign exchange reserves is not the more the better.The scale of China's foreign exchange reserves increased sharply,which bring a lot of benefits to the economy of our country,but also a number of negative effects on the healthy and stable development of the national economy at the same time:firstly,the high foreign exchange reserves wasted foreign exchange capital,increased the marginal cost of foreign exchange reserves and sacrificed national consumption and investment;secondly,high foreign exchange reserves had influenced the effect of monetary policy in our country and brought inflationary pressures;thirdly,the high level of reserve assets foreign exchange reserves increased difficulty and risk for the management;fourthly,the high foreign exchange reserves easily increased the friction between the international trade.The fifth part is about the management models and inspiration of the high foreign exchange reserves of foreign.Japan and Singapore's foreign exchange reserve management model can give us a certain degree of enlightenment:First of all,the clear purpose of foreign exchange reserves combined with the conditions and problems of its own clear reserves management objectives.Our country faced the long-term issues to enhance the competitiveness of the economy.The way to enhance the competitiveness of our country is to get more resources and technology from abroad.Through specific procedures and strict risk control foreign exchange reserves can make a difference.Secondly,setting up an effective professional management system is the key to the foreign exchange management.According to the different needs of their holdings of foreign reserves,we can set up a different portfolio of the reserves to improve the efficiency of the management of foreign exchange reserves. Thirdly,improve relevant laws and regulations.We can establish "foreign exchange reserve management method","State Administration of Foreign Exchange Investment Company Law" and other laws and regulations to regulate the conduct of foreign exchange investment company and clear the responsibilities of them,improve the efficiency of asset quality and investment,strengthen supervision and management, promote the healthy operation of foreign exchange investment company to ensure foreign currency reserve assets and increase their value.In partⅥ,the paper proposed the measures to resolve the negative impact of the high foreign exchange reserves on China's macro-economy.Firstly,appropriately decrease foreign exchange reserves.On one hand,we can appropriately increase the income of low-income earners,boost consumption and expanding domestic demand. On the other hand,we can strengthen foreign exchange reserves investment and improve management and regulations of foreign exchange reserves.Secondly, promote the exchange rate system reform.In the current managed floating exchange rate mechanism,we should reduce the central bank's market intervention,so that the domestic financial market can be gradually adapt to exchange rate fluctuations.We can achieve the floating management of RMB through the improvement of the currency basket,but no longer by one-time adjustment of the exchange rate of the government.We also should expand the range of exchange rate fluctuations,and ultimately make the foreign exchange reserves determined by the market and realize the transition to a free-floating exchange rate mechanism.Thirdly,reform the foreign exchange regime.In the foreign exchange management policy,make the phasing out of mandatory foreign exchange settlement system to the implementation of the wishes of foreign exchange settlement and sales system.Change the Foreign exchange reserves from the "possession of the State Department" to "possession of the Department to the people".Fourthly,make the balance of international payments.The first is to strengthen the management of capital projects for China's international balance sheet items of capital between the standardized management,in particular short-term capital projects to strengthen the management of contacts.The second is to strengthen China's international balance of payments statistics and to prevent loss of foreign exchange.Fifthly,adjust of the currency structure of foreign exchange reserves.The over-reliance on the dollar of China's foreign exchange reserves is not conducive to foreign exchange reserve management;therefore,we should properly adjust the currency structure of foreign exchange reserves.On one hand,as far as possible,the EEMU and some emerging Asian countries' assets will be added to the assets or foreign exchange reserves in the form of monetary assets.On the other hand, adjust the internal structure of U.S.dollar assets and convert the United States government bonds to the United States reserves mortgage bonds,corporate bonds and stocks and so on.