The purpose of this paper is to investigate China′s state foreign exchange reserves growth using monthly data in the period January 1994 to December 1998. An economic model is constructed, with a view from its format...The purpose of this paper is to investigate China′s state foreign exchange reserves growth using monthly data in the period January 1994 to December 1998. An economic model is constructed, with a view from its formation mechanism. Time series techniques are used to examine the long run relationship between foreign exchange reserves and the variables included in the model. Our empirical investigation revealed existence of a systematic long run relationship among foreign exchange reserves, exports, imports, and foreign direct investment. In the short run, the Asian financial crises have not significant effect on China′s foreign exchange reserves. Moreover, the recursive tests results indicated that the error correction model was structurally stable over the sample period, implying that the reserve holdings play a significant role in the balance payments adjustment process and separating China economy from the Asian financial crises.展开更多
In late February 2006, China surpassed Japan to become the world＇s largest holder of foreign exchange reserves. Beijing is now faced with the growing challenge of how to handle these vast reserves effectively. Althou...In late February 2006, China surpassed Japan to become the world＇s largest holder of foreign exchange reserves. Beijing is now faced with the growing challenge of how to handle these vast reserves effectively. Although China＇s soaring foreign exchange reserves indicate that its overall strength has grown, they have created internal and external pressures on the balance of the economy, and introduced risks to the financial system. It is estimated in the present study that foreign exchange reserves of approximately US$ 400bn in 2005 would have been appropriate under circumstances of a managed floating exchange rate regime and capital control. China ＇s actual reserves have far exceeded its normal demand. The objective of China is to maintain an optimal level that maximizes net benefits as a whole, Four main policv options are available for China to achieve its target： spending and investing foreign exchange reserves, gradual liberalization of the capital account, diversification of foreign exchange reserves and a switch in holders of foreign exchange reserves. Spending and investing in foreign exchange reserves can be undertaken in combination with liberalization in the capital account, given careful consideration of the risks involved. Liberalization should be extensive but gradual so that companies and individuals can adjust to changes in financial markets and manage portfolios while avoiding unnecessary risks.展开更多
文摘The purpose of this paper is to investigate China′s state foreign exchange reserves growth using monthly data in the period January 1994 to December 1998. An economic model is constructed, with a view from its formation mechanism. Time series techniques are used to examine the long run relationship between foreign exchange reserves and the variables included in the model. Our empirical investigation revealed existence of a systematic long run relationship among foreign exchange reserves, exports, imports, and foreign direct investment. In the short run, the Asian financial crises have not significant effect on China′s foreign exchange reserves. Moreover, the recursive tests results indicated that the error correction model was structurally stable over the sample period, implying that the reserve holdings play a significant role in the balance payments adjustment process and separating China economy from the Asian financial crises.
文摘In late February 2006, China surpassed Japan to become the world＇s largest holder of foreign exchange reserves. Beijing is now faced with the growing challenge of how to handle these vast reserves effectively. Although China＇s soaring foreign exchange reserves indicate that its overall strength has grown, they have created internal and external pressures on the balance of the economy, and introduced risks to the financial system. It is estimated in the present study that foreign exchange reserves of approximately US$ 400bn in 2005 would have been appropriate under circumstances of a managed floating exchange rate regime and capital control. China ＇s actual reserves have far exceeded its normal demand. The objective of China is to maintain an optimal level that maximizes net benefits as a whole, Four main policv options are available for China to achieve its target： spending and investing foreign exchange reserves, gradual liberalization of the capital account, diversification of foreign exchange reserves and a switch in holders of foreign exchange reserves. Spending and investing in foreign exchange reserves can be undertaken in combination with liberalization in the capital account, given careful consideration of the risks involved. Liberalization should be extensive but gradual so that companies and individuals can adjust to changes in financial markets and manage portfolios while avoiding unnecessary risks.
