1、附录 Rethinking Fast Growth in Chinas Foreign Exchange Reserves YuanlongWang I Introduction Since2000, Chinas foreign exchange reserves have been growing fast. By the end of2001, Chinas foreign exchange reserves had exceeded US$200bn and by the end of 2002 hadreached US$286.4bn. By the end of2003, it
2、had reached US$403.3bn and in 2004 it reachedUS$609.9bn. In l 999, Chinas foreign exchange reserves accounted for l 5.6 percent of itsGDP. The ratio has been growing continually and Was 36.88 percent of GDP by 2004, making China the second largest foreign exchange reserve holder in the worldafter Ja
3、pan. Statistics released by Japans Ministry ofFinance on 7 July 2005 show that by the end of June the same year, Japanforeign exchange reserve were valued at US$43.5bn. China has reserves ofUS$771 bn by the end ofJune 2005. However, China has a larger ratioofforeign exchange reserve to GDP than Japa
4、n. In 2005, Chinas ratio offoreign exchangereserve to GDP was 37 percent, whereas that of Japan was 18 percent. By the end ofDecember 2005, Chinas foreign exchange reserves had expanded further to reach US$818.87bn. II Cause of China s Sustained High Growth of Foreign Exchange Reserves The main reas
5、on for Chinas sustained fast-expanding foreign exchange reserves in recentyears,is continual surpluses in the current and capital accounts of Chinas balance ofpayments. In terms of sources, foreign exchange reserves can be divided into creditors rights-based reserve and debt-based reserve. The forme
6、r is reserve from current accounts, whereas the latter is from the capital accounts Foreign exchange reserves of developingcountries are mainly composed ofdebt-based reserve. Since the latter halfofthe 1990s, thestructure of Chinas foreign exchange reserve sources has undergone significant change. F
7、rom 1994 to 1996, Chinas foreign exchange reserves were mainly composed of debt-based reserve. The increased foreign exchange reserves mainly came from capital accountsurplus, which mainly resulted from the increase in foreign direct investment(FDI) Since 1997, the creditors rights segment ofChinas
8、foreign exchange reserves has gradually becomemore increased. However, during 2003-2004 the debt-based reserve rebounded dramatically. In that period,the capital account surplus soared from US$52.726bn in 2003 to US$110.66bnin2004, andChinas foreignexchangereservesincreasedbyUS$206.681bnin2004. This
9、wasclosely related to the continually growing expectations toward renminbi revaluation and theinflux ofinternational“hotmoney”in pursuit of speculative gains. It is noteworthy that since 2004, the expectation for renminbi appreciation has beengrowing continually and a large amount of speculative cap
10、italhas swarmed in. The Central Bank has adopted a compulsory foreign exchange settlement policy to maintainthe relative stability of the renminbi exchange rate, which is an important factor behindexpanding foreign exchange reserves. Seen from the current situation and the developmenttrend in the ne
11、ar future, the factors that have caused expansion ofChinas foreign exchangereserves will continue. Admittedly, the sustained surpluses in the current and capital accounts of Chinas balance of payments in recent yearsare the main reason for its continually fast-expanding foreign exchange reserves. Ho
12、wever, two fundamental factors are worthconsidering： (i)flaws in the formation of the renminbi exchange rate regime are theinstitutional root cause of sustained high growth offoreign exchange reservesand(ii)thevarious theoretical misconceptions about Chinas foreign exchange reserves have swayedpolic
13、ies and contributed to the sustained fast growth in Chinas foreign exchange reserves. In terms ofinstitutional causes, the eruption ofthe 1997 Asian financial crisis held back the process of the Chinas reform of the renminbi exchange rate regime.Therenminbi came under great pressure to depreciate. T
14、o maintain the stability of the renminbi exchange rate, there was a forceddeparturefromtheoriginal“managedfloating exchange rate regime.”Inthewakeofthe crisis, the Chinese economy was afected by the global economic recession and worseningdeflation, whichhas graduallymadetherenminbiexchangerateregime
15、 shifttoafactor“US-dollar-pegged fixed exchange rate regime.”Apart from the external impacts, the errors inChinas macroeconomic policies an d strategies, such as those concerning foreign trade, foreign capital, foreign exchange reserve and industrial policies, have led to a distortion in theformatio
16、n ofthe renminbi exchange rate regime An obvious feature of that distortion is thecompulsory settlement and sales of foreign exchange in the banks, and the closed inter-bankforeign exchange market. In such an institutional framework, the implementation of thecompulsory foreign exchange settlement an
17、d sales, the convertibility ofthe current accountsandtheCentralBanks controlontheforeign exchangepositionofthebanksdesignatedforforeign exchange operations have meant that banks, enterprises andresidents unable to holdforeign exchangeattheirownwil1. The CentralBank,meanwhile, holdsaconsiderableamoun
18、tofforeign exchangeintheform ofstateforeign exchangereserves. Suchan arrangementwilldefinitely lead to the sustained an d accelerated expansion of foreign exchange reserves. In terms of policy orientation, there have long been many theoretical misconceptions regardingthebasicfunctionsandrolesofforei
19、gn exchange reserves ：forexample, that foreignexchange reserves equal economic strength, exaggeration ofthe function offoreign exchangereserves, and accumulating reserves without definite andjustifiable reasons. All these factorshave strongly pushed the sustained high growth of Chinas foreign exchan
20、ge reserves. III Analysis of the Theoretical Misconceptions on Chinas Foreign Exchange Reserves 1 Regarding the Opinion that Foreign Exchange Reserves Equal Economic Strength Since the 1990s, there has been a popular opinion that the more foreign exchange reservesChina has, the better it is, and tha
21、t the growth offoreign exchange reserves reflects Chinas economic strength and improvement of its international status. The rapid growth in foreignexchange reserves is seen as a sign of sound economic operation. In reality, this is a biasedviewpoint that fails to appreciate Chinas actual economic co
22、ndition Foreign exchange reserve is a balancing item for international payments, which isclosely related to various aspects of the economy and to changes in the worldeconomy. Inconsidering the rational scale of foreign exchange reserves, one must take into accountvarious factors in the economy， incl
23、uding the scale and development pace of the nationaleconomy, the level ofeconomic opening up and foreign dependency, the level and structureofforeign trade development, the level ofutilization offoreign investment and the capacityoffinancinginternationally, theefficiencyofeconomic adjustmentand regulation, andtheforeign exchange
