Research On Source Structure Of China's Reserves

Since the reform of RMB exchange rate system in1994, owing to the foreign trade policy to encourage exports, strong investment policy as well as the expected appreciation of the RMB, China’s foreign exchange reserves, especially since the new century, the scale of China’s foreign exchange reserves to showing growth spurt. in February2006, China’s foreign exchange reserves Surpass Japan for the first time and have more than three trillion U.S. dollars, accounting for1/3of the global total by the end of2011. Academia generally believe that China is facing the problem of excessive foreign exchange reserves since2003. Plenty of foreign exchange reserves is conducive to stabilize the national economy, improve the confidence of foreign investors and so on. but it may also reduce the effectiveness of monetary policy, the efficiency in the use of financial resources, make foreign trade difficult to successfully carry out. With the growing scale of China’s foreign exchange reserves, the excess foreign exchange reserves has exposed a growing problem.In fact, the different sources of foreign exchange reserves play different role to maintain stability and economic growth. therefore, to mitigate the impact imposed by the queasy source structure of foreign exchange reserves on the foreign exchange and economy, we should study short-term impact and long-term relationship of the structure of sources of foreign exchange reserves,and we know it’s Significant for the country’s economic security and social development.According to the BoP, in this article, the source structure is divided into three parts, we will make detailed analysis for each part and measure net inflows of hot money since1994by the full aperture. Then through the comparative analysis, we find the differences of the source structure of foreign exchange reserve between China and Japan. According to the theory of Cointegration theory, we will Do in-depth research of the structure of the three main sources of foreign exchange reserves, foreign trade, foreign direct investment and hot money on the relationship between the growth of foreign exchange reserves. detailed analysis will be done. According to analysis, we arrival at a conclusion that several problems exist in the source structure of China’s foreign exchange reserves, and according to the conclusions, we make a few suggestions on optimizing the structure of the sources of China’s foreign exchange reserves.