A Study On China’s Moderate Scale Of Foreign Exchange Reserve

Foreign exchange reserves for a country that is of great significance. As the major meansof payment for foreign trade, the means for repayment of external debt, the main tools tostable the foreign exchange market and the main means for foreign investment of payment,the foreign exchange reserves plays a vital role in a country’s foreign relations. Therefore, acountry needs to hold enough foreign exchange reserves to meet the above requirements,however, if the foreign exchange reserves is too much, it’s will be a waste of resources inforeign exchange reserves, and will also lead to the domestic money supply and increasedomestic impact of the inflation level, therefore, decide a modest foreign exchange reservelevel is very important.Since the1997Asian financial crisis, the foreign exchange reserve in China began toincrease, growing from$13,989,000,000in1997to the end of2010to$2,847,338,000,000,the highest in the world. In addition, the growth rate of the foreign exchange reserve holdingsis accelerating, there is an accelerating trend from2001onwards, the annual average growthrate has reached to37%. With the rapid expansion of the scale, the Chinese foreign exchangereserve scale has been greatly exceed the moderate largest foreign exchange reserves.Faced with this situation, This paper makes empirical analysis on Chinese moderatescale of foreign exchange reserve by using proportion method, regression analysis methodand cost-benefit method, and in full for reference on moderate largest foreign exchangereserves at home and abroad on the basis of theory, combined with Chinese foreign trade,foreign debt service, foreign investment and the current exchange rate policy in recent years,to change the related parameters and structure of the model, to determine appropriate scale ofthe Chinese foreign exchange reserves, and then by comparing the reality scale of ourcountry’s foreign exchange reserves, to determine the scale of China’s foreign exchangereserve status, and the last on the basis of combined with the influence factors of Chineseforeign exchange reserve scale, then to give some relevant policy Suggestions onmanagement of the largest foreign exchange reserves.