The Study About The Moderate Scale Of Chinese Foreign Exchange Reserve

Since the revolution and opening policy, Chinese economy develops rapidly and the average growth rate of Chinese GDP is higher than 8%. As Chinese market becomes opener and opener, Chinese international trade develops fast. And the international trade amount becomes huger and huger. This brings big growth of Chinese foreign exchange reserve. In 1979, China's foreign exchange reserve was only 0.84 billion dollars. Since 2000 this data grows rapidly. From 2000 to 2009 China's foreign exchange grows 200 billion dollars per year. By the end of 2006, China's foreign exchange reserve had reached 1066.3 billion dollars, surpassed Japan to have the most foreign exchange reserve in the world. In 2009, though the global financial crisis made world economy gloomy China's foreign exchange reserve kept growing. In the end of 2009, this data was 2399.2 billion dollars. This equals to the 30% of the whole foreign exchange reserve all over the world. Also, it has already been the fourth year that China has the most foreign exchange reserve in the world. Moderate scale of foreign exchange reserve does not only reflect a country's international economic status and international financial power but also reflect its capacity of taking part in the international economy and regulating the domestic macroeconomy. However, holding too much foreign exchange reserve will also bring many problems. Excessive foreign exchange reserve makes the domestic currency face to the stress of appreciate. Besides, excessive foreign exchange reserve causes huge opportunity cost of idle resources, has influence on the domestic monetary policy– making and makes the regulating room of government smaller. Therefore, holding moderate size of foreign exchange reserve is very essential to Chinese economy.Facing to so fast growth rate of Chinese foreign exchange reserve, which scale of foreign exchange reserve is moderate to China? This paper will discuss it from the following five parts. The first part introduces the relevant research about foreign exchange reserve from different angles, including domestic research and foreign research. Also we give a simple description about the research way and characteristic of this paper.The second part is about the analysis ways by theories. We give the definition and function of foreign exchange reserve. Then we introduce the definition and analysis methods of moderate foreign exchange reserve. The third part is based on the second part. In this part we make verified analysis of Chinese moderate foreign exchange reserve. First we review the developing history of Chinese foreign exchange reserve during recent 30 years. Then we use ratio analysis and regression function analysis to forecast the moderate foreign exchange reserve range of China. And compared to the actual foreign exchange reserve we find the Chinese foreign exchange reserve is bigger than the calculated range by the model. And then we compared the ratio foreign exchange reserve takes in Chinese GDP with the other three Asian countries: Japan, Korea and India during the recent 10years. And we find the Chinese ratio is much higher than the other three countries. So we get the same conclusion with the model analysis that Chinese foreign exchange reserve is higher than its moderate foreign exchange reserve. And at last we analyze the good and bad influence that the present foreign exchange reserve may bring to Chinese economy. The fourth part analyzes the reasons of Chinese huge foreign exchange reserve from the three following angles: the structure reasons, the theory reasons and reasons of different years.The fifth part is about some suggestions about how to keep moderate foreign exchange reserve for China.