Generally speaking, a country's balance of payments system report consists of balance of payments statement and international investment position statement. When a country regularly discloses the balance of international reserves and net foreign investment position, it usually uses the historical cost method to calculate the price. However, in recent years, changes in international accounting standards and other factors have prompted central banks to turn to market value method as the basic means of reserve pricing.
Why does the market value method tend to replace the historical value method? First, with the development of the financial market, foreign exchange and its derivatives, gold and even the IMF's drawing rights have become market-sensitive assets, and the mark-to-market method can be used to determine the value; Second, the rapid change of accounting operation from manual bookkeeping to network-based electronic bookkeeping enables the heavy bookkeeping work calculated by market value method to be completed automatically in batches after the daily transaction. Therefore, the central banks in developed countries generally start to disclose the balance of foreign exchange reserves and investment positions mainly by market value method, or by both market value method and historical cost method.
China's foreign exchange reserves now exceed US$ 1 trillion. Three factors make it necessary for China to pay attention to the market value method. First, China's division of labor in globalization makes it possible for China's foreign exchange reserves to rise further, and the foreign exchange reserves denominated by market value method are more transparent in the market; Second, the volatility of major international currencies makes it easier for historical costs to deviate from market value, and turning to market value method is more in line with prudent accounting principles; Third, the market value method can better reflect the market performance of a country's monetary authorities in managing foreign exchange reserves in a certain period of time than the historical cost method. Therefore, from this perspective, the change of reserve pricing from historical cost method to market value method shows that the behavior of the central bank is market-oriented and self-disciplined, which requires considerable courage.
Is it necessary to divide foreign exchange reserves into functional reserves and investment reserves and implement different pricing methods for them? This hypothesis can be further discussed. The international practice is to divide reserves into high liquidity positions and medium liquidity positions, and manage and invest them separately, but usually two different pricing methods are not implemented for reserves. The reasons are as follows: first, foreign exchange reserves are artificially divided into two parts. Whether it is used for market intervention or investment income, market constraints require the two parts to adopt the same accounting valuation benchmark; Second, if it is not the same valuation benchmark, when the monetary authorities face unfavorable market changes, they will have the impulse to exaggerate the reserves that rely on long disclosure periods and shrink the reserves that rely on short disclosure periods; Third, functional and investment reserves usually have obvious differences in management objectives, methods and institutions.
Is it necessary to set up a special government agency to engage in the transformation from the reserve price method to the market value method? This may be a problem that deserves to be taken more seriously. (The author is the director of the Financial Research Center of Beijing Normal University)