A Two Pronged Approach To Reduce Foreign Exchange Reserves By 4 Trillion

< p > in recent years, with the rapid development of China's economy, China's external storage has experienced a series of geometric growth.

According to the latest data from the central bank, as at the end of 3 in 2014, China's foreign exchange reserves amounted to US $3 trillion and 950 billion, accounting for 1/3 of the world's total foreign reserves, which is 2 trillion and 850 billion US dollars higher than that of the world's second.

In 1996, China's foreign exchange reserves exceeded US $100 billion for the first time. In addition to the slowdown in growth in 2011 and 2012, the growth momentum has been rapid. In 2013, foreign exchange reserves amounted to US $3 trillion and 820 billion, an increase of US $508 billion over the previous year.

< /p >

"P > excessive foreign exchange reserves, forcing the central bank to launch the basic currency, exacerbate China's serious currency overshooting problem, and cause the security worries of overseas frozen China's foreign exchange reserves.

Foreign exchange reserves are mainly invested in US Treasury bonds (China holds 1 trillion and 272 billion 100 million U.S. dollars in March) and other highly liquid assets with low returns.

Although China's external net assets rank the second in the world, the net loss of international income from 2008 to 2012 exceeded US $700 billion.

The reason is that China's external assets return rate is much lower than the cost of external debt.

< /p >

< p >, therefore, nearly 4 trillion and the increasing storage of foreign reserves is a difficult problem for Chinese government to solve.

In December last year, the vice president of the central bank and the Secretary for foreign trade, Yi Gang, said that no matter how the model was calculated, China's external reserves had obviously surpassed the optimal scale.

In order to manage foreign assets well, we must distinguish between increment and stock.

< /p >

< p > in terms of increments, such as the vice president of Yi Gang, the balance of payments is the only way to reduce the increase in external reserves.

In the case that the RMB exchange rate almost reaches the limit that the export sector can afford, increasing imports and increasing foreign investment are the only options.

This requires stability of the RMB exchange rate and the creation of good imports and external investment environment.

Especially for the latter, the Chinese government needs to drastically reform the policies and regulations governing foreign investment, simplify the examination and approval procedures of the regulatory authorities, raise the level of convertibility under capital terms, and conclude an international investment agreement with more economies.

< /p >

< p > in terms of stock, a href= "http://www.91se91.com/news/index_c.asp" > diversification > /a > reform still needs to be further deepened. Reducing the ratio of US debt assets is only the beginning. It also needs to shift from fixed income investment to equity and invest more in physical assets.

In recent years, there has been a significant change in China's external capital investment, and the proportion of investment in corporate bonds and stocks has increased significantly.

To put it plainly, it is to adjust the investment thinking of foreign exchange reserves and promote the upgrading of industrial structure.

A large number of foreign exchange reserves, instead of being absorbed by overseas countries and institutions in the form of low cost liabilities, will soon be invested in China's fast-growing economy. It is better to invest in China independently.

To promote industrial restructuring and enhance China's position in the global industrial chain is particularly critical. The state needs strong support for the enterprise brand building plan.

< /p >

< p > in fact, how to revitalize the stock and control the increment has already attracted the attention of policy makers.

In January 2013, the responsible person of the safe answered the reporter's question about the use of innovative foreign exchange reserves. In recent years, during the course of monetary policy regulation and foreign exchange management, foreign exchange reserves have been continuously innovating to support the financial institutions' service < a href= "http:// www.91se91.com/news/index_c.asp" > the real economy < /a > development and "going global" strategy, and in the foreign exchange reserve management organization, the foreign exchange reserve entrusted loan office has been established, which is responsible for innovating the foreign exchange reserve utilization.

In June 2013, Premier Li Keqiang chaired a State Council executive meeting to study and confirm the support of enterprises to "go out".

< /p >

< p > innovation > a href= "http://www.91se91.com/news/index_c.asp" > foreign exchange reserve < /a > use, expand the entrusted loan platform of foreign exchange reserve and pfer channels of commercial banks, and vigorously develop export credit insurance (Fang Xinbao).

We will push forward the pilot work of individual foreign direct investment.

A few days ago, in order to balance current account receipts and expenditures, the State Council issued several opinions on supporting steady growth of foreign trade. It pointed out that we should further strengthen imports, including further reducing the types of automatic import licensing goods, actively support the import of advanced technology equipment and key parts, such as digitalization and intellectualization, expand the import of scarce domestic resources, and rationally increase the import of general consumer goods closely related to people's lives.

In a sense, the expansion of imports is a good recipe for external storage and reducing burdens.

< /p >

< p > in short, in the face of China's huge foreign exchange reserves of nearly 4 trillion dollars, China must keep two pronged lines. In terms of increments, it is necessary to increase imports and expand foreign investment.

< /p >