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China's foreign exchange reserve balance
According to the data of the National Bureau of Statistics, by the end of May 2003, the balance of China's foreign exchange reserves had reached US$ 340.06 billion, an increase of US$ 53.653 billion over the end of last year. In terms of total amount, the reserve scale is the second in the world? Second only to Japan ($545.6 billion). The rapid growth of China's foreign exchange reserves has once again aroused people's concern about the appropriate scale of foreign exchange reserves. At present, the scale of China's foreign exchange reserves is close to the import scale of one year, which is 15 times of short-term debt and accounts for one third of the annual GDP. Because China's capital account has not been opened, the scale of foreign exchange reserves has far exceeded the most appropriate level discussed in its traditional theory. Is it necessary to maintain such a high reserve asset? What are the negative effects? How about its cost and benefit is worth discussing.

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1, the cost of foreign exchange reserves is high.

Foreign exchange reserve is a symbol of real resources, and it has opportunity cost. The opportunity cost of holding foreign exchange reserves is equal to the domestic capital productivity minus the rate of return on holding foreign exchange reserves. Because the safety of official reserve assets is the first priority, foreign exchange reserves of all countries are generally invested in short-term government bonds of reserve currency countries, and the yield is low (1-2% on average after World War II). This is equivalent to a country with a low level of economic development (usually a country with a large amount of foreign exchange reserves) exporting capital to a country with a high level of economic development (a reserve currency issuer). If China borrows a lot of foreign debts and holds huge foreign exchange reserves at the same time, it is tantamount to borrowing funds from abroad at a high price, and at the same time transferring domestic funds abroad for foreigners to use at a low price, and its potential losses are obvious. In fact, China borrowed a lot of foreign debts at a high cost in the 1980s and 1990s (at present, China's foreign debt balance is about US$ 6543.8+060 billion). Since the 20th century, major economies in the world have entered a period of low interest rates, and the return on investment in global financial markets is also in a downturn, which has reduced the return on investment in China's foreign exchange reserves. At the same time, holding foreign exchange reserves means temporarily giving up using a certain amount of actual resources, thus losing the domestic economic growth and income level brought about by investing these resources. This also highlights the cost of China's high foreign exchange reserves.

2. Inflationary pressure

As a financial asset, the change of foreign exchange reserves will naturally have a great impact on domestic financial operation. In fact, China has a fixed exchange rate pegged to the US dollar, so the People's Bank of China, as the central bank, plays the role of the final market liquidator in the foreign exchange market. The increase of foreign exchange reserves has increased the issuance of RMB, because the official reserves are purchased and held by the monetary authorities, and their corresponding reflection in the accounts of the monetary authorities is foreign exchange, which is the main component of China's basic currency. Since the exchange rate was unified from 65438 to 0994, the sustained and rapid increase of foreign exchange reserves has made foreign exchange holdings the main way for the central bank to invest in the base currency. The corresponding increase in foreign exchange accounts for the central bank's base money will lead to an excessive increase in the money supply, which will adversely affect the macroeconomic operation and financial situation and bring long-term inflationary pressure to China's monetary policy. Although China is still in the stage of deflation, its economic indicators have begun to improve, and the possibility of falling into inflation once it gets out of deflation cannot be ruled out. To this end, the central bank has adopted corresponding write-off policies: for example, frequent repurchase in the inter-bank bond market, and the People's Bank of China issuing bills to withdraw the base currency. According to incomplete statistics, in the first five months of 2003, the central bank has withdrawn more than 400 billion yuan from the base currency to slow down the growth of the base currency. However, due to the limited scale of China's money market, especially in the case that the circulation of central bank bills has exceeded 200 billion yuan, with the continuous increase of foreign exchange holdings, the space for the central bank to intervene in sterilization has become smaller and smaller. This has brought considerable trouble to the central bank: first, the stability of monetary policy has been challenged, and monetary policy is facing medium and long-term inflationary pressure. Second, due to the de facto integration of monetary policy and exchange rate policy, the policy allocation space for adjusting external equilibrium with exchange rate policy and internal equilibrium with fiscal and monetary policy will be lost, and it is difficult to achieve internal and external equilibrium at the same time. This is the typical Meade conflict faced by the central bank.

3. Increase the pressure of RMB appreciation.

Under the existing RMB exchange rate system, if the central bank does not have effective assets to hedge excessive foreign exchange holdings, the rapid increase of foreign exchange reserves will promote the continuous appreciation of the RMB. Recently, not only Japan, the United States and other countries are vigorously advocating the appreciation of the renminbi, but also the funds that fled in the past are showing signs of returning. Even if international hot money "sneaks into China", the RMB will face the pressure of appreciation. At present, export is the biggest driving force for China's economic growth, and the weakening of export competitiveness will directly affect the growth rate of the national economy and the sustainable development of China's economy, so it is not appropriate for RMB to appreciate significantly at present. From this perspective, foreign exchange reserves should not be too much.

4. Increased the difficulty and risk of reserve asset management.

In today's financial globalization, due to the rapid and large-scale flow of international capital, interest rates and exchange rates in financial markets fluctuate violently. As a national wealth, foreign exchange reserves will face great risks if they are too large, and high foreign exchange reserves will bring difficulties to the management of maintaining and increasing the value of reserve assets. Because a considerable part of China's foreign exchange reserves exist in the form of dollar assets, in the past year or so, the exchange rate of the dollar against the euro has risen and fallen by more than 30%, and the value of the dollar has continued to fall, making it inevitable that China's foreign exchange reserves, which account for a large proportion of the dollar, will shrink; If roughly calculated according to 60% of the US dollar foreign exchange reserves, about 654.38+080 billion US dollars of foreign exchange reserves are experiencing "book" losses. In addition, in the past two years, the return on investment in global financial markets has been in a downturn. Since 200 1, the Federal Reserve has cut interest rates 13 times, and the federal funds rate has now dropped to 1%, which is at a historical low in 45 years, which also makes the investment income of China's foreign exchange reserve assets decrease continuously. The larger the scale of foreign exchange reserve assets, the more difficult it is to maintain and increase the value.

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In short, the scale of foreign exchange reserves should be moderate, not the more the better. We should fully realize the negative impact of the rapid growth of foreign exchange reserves on the economy. In order to properly control its growth scale, we can take the following countermeasures:

1. Increase imports and accelerate industrial restructuring.

Encourage commercial banks to increase US dollar loans to enterprises, support domestic enterprises to import advanced technology and equipment, strengthen technology development and cooperation with foreign enterprises, and promote the adjustment and upgrading of China's industrial structure.

2. Implement the willingness to settle and sell foreign exchange and improve the basis for determining the RMB exchange rate.

It is necessary to further relax foreign exchange restrictions under the current account, including foreign exchange restrictions on travel and study abroad, gradually abolish the system of compulsory settlement and sale of foreign exchange by banks, implement the willingness to settle and sell foreign exchange, and improve the basis for determining the RMB exchange rate.

3. Expand the floating range of RMB and improve the RMB exchange rate formation mechanism.

Promote the marketization process of RMB exchange rate formation mechanism, expand foreign exchange trading entities, allow major foreign trade enterprises to enter the foreign exchange market, increase the scale of foreign exchange transactions, reduce the frequency of central bank intervention in the market, relax the fluctuation range of RMB exchange rate, and implement a truly "market-based, managed floating exchange rate" mechanism.

4. Gradually relax the control of capital projects and allow residents to invest abroad.

Capital account deregulation mainly refers to gradually reducing the choice of capital outflow to encourage more domestic enterprises to invest abroad, which actually means that China's overseas assets have been transformed between the government and the private sector, which is not only conducive to reducing the risk of foreign exchange reserves borne by the government, but also conducive to improving national income (because the return rate of private overseas investment is usually higher than the official reserves).

5. Strengthen international monetary cooperation and sign regional multilateral currency swap agreements.

In a sense, close international monetary cooperation can greatly reduce a country's foreign exchange reserves. Because, on the one hand, bilateral trade between member countries that have signed regional monetary cooperation can reduce the foreign exchange reserves held to balance trade balance; On the other hand, currency swaps can also be used to provide funds for member countries in the region that have difficulties in short-term external payments, which also reduces the level of foreign exchange reserves held to prevent financial crises or emergencies. Therefore, regional monetary cooperation can effectively reduce the level of foreign exchange reserves held by developing country members.