On The Strengthening Of China's Foreign Exchange Reserves Management

Foreign exchange reserve is the main part of the international reserve. The management of foreign exchange reserve not only related to one country's ability to adjust the balance of payments and keep a stable exchange rate, but also to the sustainable development of the economy of a country. The foreign exchange reserve has been developed very fast since the reform of the system of the foreign exchange management in 1994 in China. The total amount of it has surpassed 100 billion US dollars in 1996, and it has surpassed the amount of foreign exchange reserve of Japan by 853.7 billion in February, 2006. The remaining sum of foreign exchange reserve has reached 1433.6 billion US dollars up to September 2007. How to improve the management of such a huge sum of foreign exchange reserve has become an important task to the reserve control section. In July 21st, 2005, our country reformed the RMB exchange rate system, RMB rate will never peg to US dollar, but adopted a system, which refers RMB rate to package currency, bases the exchange rate on the relationship between supply and demand in market, and is a dirty float rate. Then, the marketing of RMB rate increased the fluctuation of exchange rates, by which RMB exchanges to foreign currency increased the exposures to exchange rate and the difficulty of reserve management intensifies.Generally speaking, the foreign exchange reserve is normal when an economical body maintains the basic balance of the international payment balance and the financial market is not distorted. At present, the global economy is unbalanced as well as the international payment. Therefore, the scientific nature and rationality become dubious. At the same time, the high speed of the growth has also brought many negative effects. With the growth of foreign exchange reserve, the income of foreign exchange reserve is more and more concerned about.The paper conducts a research to the project scale management, structure management and the management system after analyzing the process of foreign exchange reserve management in our country and its characteristic, which includes four parts. The first part made it clear about the meaning of suitable scale and the negative effects of the high growth speed, and carried on the qualitative and quantitative analysis to the reserve based on the rational reserve scale theory and international indicator. The amount of foreign exchange reserve surpassed corresponding suitable scale from 2004 to 2006 through analysis. Long-term and the short-term countermeasure were produced to adjust foreign exchange reserve. Then the paper tried to make a deep research for the currency portfolio management, portfolio management and the extant problems according to the principle and method of the management of foreign exchange reserve on international. The third part did a research of the management system in our country. The proposals were put forward to improve our management system after analyzing the developing process and shortages of the system. The last part is the summary of the whole thesis.