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ID: 076891

China's rapid accumulation of foreign exchange reserves and its / Zheng, Yongnian; Yi, Jingtao

Zheng, Yongnian	Journal Article
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Publication

2007.

Summary/Abstract

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 policy 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.

Key Words

Foreign exchange reserve ; Capital control ; Financial Liberalization

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ID: 083372

Revaluation of the Chinese currency and its impacts on China: a political economy approach / Yi, Jingtao; Zheng, Yongnian; Chen, Minjia

Zheng, Yongnian	Journal Article
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Publication

2008.

Key Words

China ; Currency ; Exchange Rate ; Foreign exchange reserve ; Foreign Exchange Reform

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ID: 054141

RMB revaluation will serve China's self-interest. / Tung, Chen-Yuan; Baker, Sam

Tung, Chen-Yuan	Journal Article
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Publication

2004.

Key Words

Monetary Policy ; Renminbi exchange rate ; Exchange rate regime ; Foreign exchange reserve ; Hot money

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