Study On Moderate Scale Of China's Foreign Exchange Reserve

Since reform and opening up, China's foreign exchange reserves have showed overall growth trend, especially in 1994 after the foreign exchange management system reform, China's foreign exchange reserves continued to grow rapidly. By the end of 2009, China's foreign exchange reserves increase to 2.399152 trillion U.S. dollars from the 51.62 billion U.S. dollars in 1994. Among the more ten years, the average foreign exchange reserves growth rate is nearly 27%.Under open economy, foreign exchange reserves play an important role on a country's balance of payments adjustment, international reputation and financial ability. Although the full amount of foreign exchange reserves increase a country's comprehensive national strength, the excessive growth of foreign exchange reserves isn't no problem. Because holding foreign exchange reserves exists cost, including the opportunity cost, wasting resources, the inflationary pressure, the pressure of RMB's appreciation and the effectiveness of monetary policy. Since the 90s of the 20th century, a number of currency crises sweeping many countries make them pay more attention on the foreign exchange reserves than ever before. Since China joined in the WTO, the openness of our economy has continued to improve and the scale of capital flows gradually has expanded, the uncertainty of the external economic environment has also increased. Therefore, ensuring our economic security has become one of the important macro-control tasks. What role does more than 2 trillion U.S. dollars of foreign exchange reserves in China's economic development play? Under the growing momentum of the foreign exchange reserves, does it the more the better? How do our country determine the appropriate scale of China's foreign exchange reserves?The paper summarizes and answeres these questions. The first Chapter is the introduction to describe the background and research significance and reviewe the domestic and foreign research literatures on Foreign Exchange Reserve. The second chapter describes foreign exchange reserves's definition and function, summarizes the development course of China's foreign exchange reserves and the status and analyses the impact of large foreign exchange reserves on our economy. The third chapter introduces the model of moderate scale of foreign exchange reserves. The ChapterⅣshow us the empirical studies of China's appropriate foreign exchange reserves. The chapterⅤdraws general conclusions and gives several policy recommendations for the management of China's foreign exchange reserves.