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An Empirical Assessment on China’s Optimal Foreign Exchange Reserve: 1985‐2004

An Empirical Assessment on China’s Optimal Foreign Exchange Reserve: 1985‐2004 This paper analysises China’s optimal scale of foreign reserve during 1985‐2004 with single ratio and synthesis ratio. The single ratio analysis shows that China’s foreign reserve to import ratio has exceeded 40 per cent after foreign exchange rate united in 1994. The foreign reserve to money supply ratio is high as 23.8 per cent, and will exceed 25 per cent of international alertness in 2005. The foreign reserve to debt ratio largely exceeded 30 per cent of international alertness. The current account balance to GDP ratio and the current account balance plus FDI to GDP ratio is out of international alertness in most years. The synthesis ratio analysis show that China’s real foreign exchange reserve exceeded foreign exchange demand of debt, FDI and import during 1996‐2004, and the exceeded ratio is close to 90 per cent in 2004. This paper also discusses influence of capital flight after 1995 and international hot money after 2002 to China’s optimal scale of foreign exchange. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Asia Business Studies Emerald Publishing

An Empirical Assessment on China’s Optimal Foreign Exchange Reserve: 1985‐2004

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References (1)

Publisher
Emerald Publishing
Copyright
Copyright © 2007 Emerald Group Publishing Limited. All rights reserved.
ISSN
1558-7894
DOI
10.1108/15587890780001292
Publisher site
See Article on Publisher Site

Abstract

This paper analysises China’s optimal scale of foreign reserve during 1985‐2004 with single ratio and synthesis ratio. The single ratio analysis shows that China’s foreign reserve to import ratio has exceeded 40 per cent after foreign exchange rate united in 1994. The foreign reserve to money supply ratio is high as 23.8 per cent, and will exceed 25 per cent of international alertness in 2005. The foreign reserve to debt ratio largely exceeded 30 per cent of international alertness. The current account balance to GDP ratio and the current account balance plus FDI to GDP ratio is out of international alertness in most years. The synthesis ratio analysis show that China’s real foreign exchange reserve exceeded foreign exchange demand of debt, FDI and import during 1996‐2004, and the exceeded ratio is close to 90 per cent in 2004. This paper also discusses influence of capital flight after 1995 and international hot money after 2002 to China’s optimal scale of foreign exchange.

Journal

Journal of Asia Business Studies – Emerald Publishing

Published: May 1, 2007

Keywords: Foreign reserve; Optimal scale; Ratio analysis

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