The Reseach On The Proper Level Of Chinese Foreign Exchange Reserve

Foreign exchange reserve is important to the international finance and is the core of the international reserve of a country. It decides the capacity of a country to control the international payments and stabilize the exchange rate and the international financial organizations and governments are paying continued attention to it. China's foreign exchange reserve is keeping growing with high speed for the relatively stable exchange rate and the good international payments and many other factors. The speed of growth is unbelievable especially after we took part in WTO. In the first half of this year, the volume of our foreign exchange reserve has exceed 2 trillion. The adequate reserve can play an active role in the international trade, but we should recoganize that the foreign international exchange isn't the more the better.Too much reserve will make a loss of the resources and the economic well-being. At the same time, there will be some negative impact in the progress of one country go after the high-level reserve unbalanced. So it is necessary to get a clear understanding of China's foreign exchange reserve and determine and keep a proper scale of it.This paper follows a line of considering China's foreign exchange reserve in macro-economy and tries to study the relations between exchange reserve and the individual variables affecting its supply and demand. This paper mainly deals with the question of whether China's foreign exchange reserve can meet the requirement for the Chinese economic development., or in other terms, what is the appropriate level of Chinese foreign exchange reserve. Apart from the introduction and conclusion part, this paper falls mainly into four parts:In the first part, explaining the theoretical and practical significance, and making explanations of the main economic concepts.In the second part, a contrast of foreign international reserve between China and some other countries is made, and finding that China's indicators is higher than normal and paving the way for the measurement of reserve.In the third part, a empirical analysis and some other model analysis of the scale of foreign exchange reserve is made. Based on the foregoing analysis, the conclusion that China's reserve is exceed can be reached.In the last part, some policy recommendations are proposed.