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

Foreign exchange reserve is the core of the international monetary system and of vital importance in the area of international financial research.It concerns the governments' ability of adjusting balance of payment and stabilizing exchange rate,and all financial authorities keep close watch on its development.Nowadays, under the background of the fact that the international economy is internationalizing constantly,foreign exchange reserves are absolutely necessary and all important economic resources to any country.But at the same time,it is not better to have foreign exchange reserves as more as Possible,because it will occur the high opportunity cost and the restriction to monetary policy.Too many foreign exchange reserves will result in the waste of the foreign currency resources,increase the inflationary pressure,strengthen the difficulty of the implementing of the monetary policy,even cause foreign currency exchange depreciate and suffer the impact of the venture capital,which will produces serious harmful effects or danger to the development to the economy of a country.So discussing the moderate scale of foreign exchange reserves is so important to economic development.The foreign exchange reserve of China increases continuously in recent years, the annual increase in foreign exchange reserves are more than 100 billion dollars and it has replaced Japan as the world's largest foreign exchange reserves country in February,2006.UP to 2008,China's foreign currency reserves have risen to 1.9 trillion dollars.Although there is no uniform standard to the number of China's optimum foreign exchange reserve in theory and practice,the negative affection on China economy of huge level of foreign exchange reserve is becoming more and more serious.This thesis systematically analyzes foreign and domestic theories on proper level of foreign exchange reserve,thoroughly studies Chinese optimum 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.