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China's foreign exchange reserve growth on the basis of the impact of monetary control


A rapid growth of China's foreign exchange reserves
1994, China's foreign exchange management system, to achieve the official exchange rate and market exchange merged, since the formation of a market-based, managed floating exchange rate system, a single. Stability of the RMB exchange rate has greatly promoted the export of foreign trade and foreign direct investment inflows, making China's international balance of payments current account and soon appeared double surplus capital situation. Continuing trade surplus, foreign direct investment and rapid growth, and qualified foreign institutional investors (QFII) to enter the domestic securities market, etc., provide the market with foreign exchange supply. Meanwhile, in order to maintain the stability of the RMB exchange rate, China's monetary authorities have to absorb a lot of dollars from the market, making the central bank's foreign exchange reserves increased passive.
Since 1994, China's foreign exchange reserves showed a continuous increase in the number of trend. It can be seen from the drawings, prior to 1994, China's foreign exchange reserves, a smaller scale, the growth rate slow. Since 1994, China's foreign exchange reserves growth rate increased. 1994 to 1997, China's foreign exchange reserves increased by about 30 billion U.S. dollars annually. Since 1998, the Asian financial crisis, China's exports, foreign investment slowed down, foreign reserves increased in the obvious. But by 2001, China's economic situation improves, increase the scale of foreign investment, foreign exchange reserves growth again. The end of 2002, China's foreign exchange reserves up to 2 $ 86,407,000,000, an increase of $ 74,000,000,000. As of the end of 2003, China's foreign exchange reserve has reached 4 03.251 billion U.S. dollars, annual growth rate of 40.8%. At present, China's foreign exchange reserve amounted only to Japan, ranked second in the world.
adjust the balance of payments as foreign exchange reserves, maintaining exchange rate stability and the settlement of international reserves to maintain sufficient number will help to improve the reality of our ability to guard against financial risks, and enhance China's economic and domestic and international confidence in the currency, attract foreign investment into, and promote economic development. However, the central bank's foreign exchange reserves are external assets, their access is based on the cost of occupation of the RMB, foreign exchange reserves will inevitably lead to a significant increase in number of base money is occupied, the currency of our economy on one hand the demand for capital investment is limited, and the other the one hand, sustained large numbers of international capital into our country, to a certain extent, economic growth increased dependence on international capital, reducing the safety factor of the domestic economy. Once the massive inflow of international capital flow into China's economic development and foreign trade will have a strong impact, while the monetary authorities control of base money has also brought a greater impact.
2 base money growth of foreign exchange structure of
base money (monetary base) also known as the monetary base, a strong currency or energy currencies, including the central bank for the expansion of broad money and credit provision of various liabilities, mainly referring to the currency held by banks (cash) and bank foreign currency (cash in circulation), and the banks and non-bank deposits in the monetary authorities. Base currency is the expansion of banking system deposits, money to create the foundation of modern monetary theory and policy analysis of policies and measures the Central Bank of the relationship between economic objectives and the final major of the media factor. In the modern banking system, the central bank's macro-regulation of financial activities, mainly by controlling the number of base money to achieve. The specific operation is: when the central bank to raise or lower the deposit reserve rate, the Commercial Bank will adjust the balance sheet items, the corresponding increase or decrease its reserves at the central bank, through the money multiplier effect, can the money supply volume contraction or expansion of the role generated. Changes in public cash deposits can also cause changes in the derived, thus affecting the money supply to expand or shrink. When the public will be cash in the bank, the bank can be a certain percentage (ie, after deduction of the reserve due) for lending to the banking system caused a series of deposits within the expansion process; when the public from the banks to withdraw cash, will in the banking system caused a series of deposits within the contraction process. Therefore, money supply targeting in the future, usually on the regulation of the monetary base has become the core of monetary policy.
In China, the base currency in theory the same as deposits. The basis of currency issue in China there are three basic channels: financial channels, the bank credit channel and foreign exchange loans. Since the mid-20th century, 90, of the main channel of base money has gone through some changes. Before 1993, the central bank base money mainly invested in state-owned commercial bank lending to the central bank lending to state-owned banks and then the base currency base currency increment of about 80% or more. 1993 had reached 84%. But in recent years central banks monetary base and then the proportion of total loans declined in 1998 and 1999, decreased to 24% and -9%. After 1994, foreign exchange management system, the number of foreign exchange reserves continued to grow, making the delivery of basic currency structure has changed. Foreign exchange in the basic money supply increase in the proportion of its loans to replace and then become the main channel of base money. In 1994, the amount of foreign exchange to increase the monetary base increases in the proportion of up to 78%. Since 1994, China's foreign exchange account for the proportion of the total monetary base was increasing year by year. By 2003, the amount of central bank foreign exchange up to 34 84.69 billion yuan, accounting for 65.9% of the total monetary base. It is obvious that the increase in foreign exchange reserves led to sharp increase in currency exchange channels, which reflects not only our dependence of monetary policy to increase foreign exchange reserves, but also the stability of our country's monetary policy based on damage.
3 base money growth on foreign exchange control of foreign exchange reserves
substantial growth year after year, making the delivery of base money by other means of space decreases. Foreign exchange reserves in 2001 than in 2000, an increase of about 46.6 billion U.S. dollars, taking the base currency is 3856 billion U.S. dollars, accounting for additional base money amounted to 91%. To alleviate the pressure on the monetary base, China's monetary authorities to open market operations to implement the indirect control approach, the basic objective is to use open market operations in hedging operations, regulating the financial system's liquidity position, both to ensure that financial institutions Normal payment and settlement and reasonable demand for loan funds, and appropriate control and regulation of money supply and credit scale, to maintain the basic stability of money market interest rates. Hedging include: ① the Central Bank resumed lending to commercial banks; ② some special deposits for financial institutions; ③ issuance of central bank financing bonds; ④ in foreign investment has begun to selectively identify investment projects to strengthen the capital projects control and reduce the low efficiency of capital inflows; ⑤ in external debt, not increased since 1995 and long-term foreign commercial loans and higher interest rates early repayment of part of the foreign loans. Ability of the central bank the size of the hedge by the economic development needs of the money supply and the money multiplier of cash / demand deposit ratio, fixed / demand deposit ratio and other factors determined. Channels of foreign exchange squeeze base money of monetary control would be the impact of the following aspects: the spatial regulation of 3.1 decreases the monetary base
present, the major central banks measures to offset foreign exchange the central bank to recover refinancing in this way will inevitably be further restrictions on declining loan balance, resulting in write-off of China's foreign exchange capacity is very limited. Although the short-term hedging measures taken to some extent alleviated the pressure of the base currency, but due to financial hedging may give a heavy burden, coupled with a huge foreign exchange reserves increased speed to recover the loan and then less and less room for maneuver. Another development of inadequate monetary and financial system, through open market operations to offset the conditions are not mature enough,[link widoczny dla zalogowanych], our monetary authorities through the currency hedging foreign exchange open market operations will be increasing the pressure, so the long-term foreign exchange hedging measures would not have a significant role.
3.2 passive control of base money increased
exchange settlement and sales force in China's current system, the central bank had foreign exchange reserves by way of handling the foreign exchange market intervention activities to make the base money put on the extent of the international balance of payments increased. As foreign exchange reserves depends on the balance of payments, and in an open economy, changes in the balance of payments depends on the level of national income, import and export status and capital flows, the central bank can not directly control its modest, only By adjusting the interest rates, exchange rates and capital flows affect the import and export of means of indirectly controlling the balance of payments changes. When the balance of payments surplus, the central bank's foreign exchange reserves, base money and money supply increased; When the balance of payments deficit, the foreign exchange reserves to reduce the central bank to put in the form of foreign exchange to reduce the base currency, currency reduced supply. Endogenous monetary base increased the central bank can not make money on the basis of the effective implementation of real-time control. China's currency reform, leading to progressively reduce the deposit reserve ratio, money multiplier amplification, the money multiplier increases the magnification error of the monetary base, reducing the accuracy of monetary control is not conducive to monetary policy objectives.
4
the conclusions and recommendations of the Central Bank's monetary policy target is based on maintaining price stability and promote economic growth, which makes the total supply of base money by the basic qualification. The rapid growth of foreign exchange reserves