Management of China's foreign exchange reserves: a case study on the state administration of foreign
AbstractSummary for non-specialistsWith rapid economic growth and continuing economic integration with the outside world, China's foreign exchange (FX) reserves have witnessed considerable accumulation. As of 2009 it amounted to USD 2.4 trillion, accounting for just under 1/3 of the global FX reserves. Rapid growth of FX reserves at this speed has created various problems, e.g. inflationary pressure and huge holding costs.In this paper by analyzing the SAFE - Chinese governmental agency in charge of administering the FX reserves in the country, we review how Chinese FX reserves are currently managed and their performance so far. Then, in the light of these findings and borrowing literature from the current debate on Sovereign Wealth Funds (SWFs), several reform proposals are presented regarding how to better tackle the problems relating to these rapidly accumulated FX reserves in China. It is argued that the proposed reform options not only benefit China, but also help in addressing some wider issues (e.g. global imbalances), therefore contributing to a more harmonious global economy.
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Bibliographic InfoPaper provided by Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission in its series European Economy - Economic Papers with number 421.
Length: 29 pages
Date of creation: Jul 2010
Date of revision:
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More information through EDIRC
Yu-Wei Hu foreign exchange rate policy monetary policy China management of foreign exchange reserves international portfolio investment;
Find related papers by JEL classification:
- E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- F31 - International Economics - - International Finance - - - Foreign Exchange
- F34 - International Economics - - International Finance - - - International Lending and Debt Problems
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-08-28 (All new papers)
- NEP-MON-2010-08-28 (Monetary Economics)
- NEP-TRA-2010-08-28 (Transition Economics)
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