1、4 The International Reserve Account and Chinas Forex Reserve Management McGraw-Hill/Irwin Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 4-1 The International Reserve Account lThe international reserve account includes all the assets undertaken by the authorities to finance t
2、he overall balance and intervene in the foreign exchange markets. McGraw-Hill/Irwin Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 4-2 The International Reserve Account lOfficial reserves assets is composed of nGold nForeign exchange nSpecial Drawing Rights nReserve positions
3、 in the IMF McGraw-Hill/Irwin Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 4-3 Gold The Gold/International Reserve Ratio(2004) Countrie s % ratiocountries % ratio USA58.5%Swiss48.9% Germany 48.5%Japan1.3% Italy 50.7%China1.7% McGraw-Hill/Irwin Copyright 2001 by The McGraw-H
4、ill Companies, Inc. All rights reserved. 4-4 Foreign Exchange Reserve lA reserve currency should have the following properties nCan be changed to other reserve currencies freely. nAccount for important position in the International Monetary System. nHas stable purchasing power . McGraw-Hill/Irwin Co
5、pyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 4-5 Foreign Exchange Reserve McGraw-Hill/Irwin Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 4-6 Special Drawing Rights lThe reserve assets created by IMF in 1970, mainly hold by IMF member countries. l15 o
6、fficial organizations can hold SDR, such as Asian development bank, African development bank and the Bank for international clearing. lIt is used as payment method between IMF member countries. McGraw-Hill/Irwin Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 4-7 Special Drawi
7、ng Rights lOriginally SDR is the weighted average of the basket of 16 currencies. lThe IMF adjusts the basket every five years to ensure those currencies are the most commonly used currency and the weighted average can reflect the importance of each currency in the international trade. McGraw-Hill/I
8、rwin Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 4-8 Special Drawing Rights lSince 1980, the value of SDR is determined by the weighted average of 5 currencies. lSince 1999, SDR is the weighted average of the following 4 currencies from the 5 industrial nations: nU. S. Dol
9、lar nPound Sterling nJapanese Yen nEuro (France) nEuro (German) McGraw-Hill/Irwin Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 4-9 Special Drawing Rights The latest weight starts in 2011/1/1: Weight Rate Dollar Value USD 41.9% 1 0.419 Euro 37.4% 1.3021 0.487 GBP 11.3% 1.524
10、6 0.172 JPY 9.4% 0.01056 0.001 1.079 McGraw-Hill/Irwin Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 4-10 Special Drawing Rights lSDR is calculated daily based on the equivalent Dollar value of Dollar, Euro, Japanese Yen and Pounds quoted every noon in London market. McGraw-
11、Hill/Irwin Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 4-11 Special Drawing Rights lStarting 1983 the interests of SDR is calculated every week based the weighted average interest rates of the five countries. Specifically, the weighted average of the three-month treasury b
12、ills of the US, UK and France, the three-month interbank interest of Germany, and the three month deposit rate of Japan. McGraw-Hill/Irwin Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 4-12 Special Drawing Rights lStarting 1970 the IMF has issued 22 billion US Dollar worth o
13、f Special Drawing Rights. 2/3 is hold by developed countries. McGraw-Hill/Irwin Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 4-13 Special Drawing Rights lThe function of SDR: nThe IMF member countries can use it to return the loans to IMF. nCan used as payment method betwee
14、n IMF member countries. McGraw-Hill/Irwin Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 4-14 Reserve Position in the IMF lAlso called General Drawing Rights. Mainly composed of 25% of gold or foreign exchange a country pays the IMF, and 75% of the home currency. McGraw-Hill/
15、Irwin Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 4-15 Official Reserve Account lFunctions: nSubsidize the BOP deficit, and maintain the external payment capability. nAs intervention assets, it adjusts the exchange rate of the home currency using foreign currency reserve.
16、nIts an important credit for a country to borrow abroad. It also guarantees the confidence in its home currency. McGraw-Hill/Irwin Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 4-16 Official Reserve Accounts lOfficial reserve accounts scale is determined by the following fac
17、tors nThe countrys relevant position in the international monetary system nThe BOP situation nThe efficiency of other BOP adjustment measures nThe countrys financing ability and the international circumstances nThe forex exchange rate system. nThe degree of openness to the world. nThe opportunity co
18、st for holding the official reserve. nThe economic development objectives. McGraw-Hill/Irwin Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 4-17 Official Reserve Account lThe principles for official reserve structure nLiquidity nSafety nProfitability McGraw-Hill/Irwin Copyrig
19、ht 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 4-18 Chinas Forex Reserve Management Until June 2014, Chinas forex reserve has exceeded 4 trillion U.S.Dollar. McGraw-Hill/Irwin Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 4-19 Chinas Forex Reserve Management
20、 lDebate on Chinas forex reserve scale nSome think Chinas current reserve scale is unreasonable. nThe others hold that it is reasonable. McGraw-Hill/Irwin Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 4-20 How to decide the forex reserve scale? Normally, the following ratio
21、is used to decide whether one countrys forex reserve scale is reasonable. lReserve/Imports: 30-40% lReserve/GDP: 8% lReserve/Foreign debt: 30% McGraw-Hill/Irwin Copyright 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 4-21 Chinas Forex Reserve Scale lHowever, most people hold that Chin
22、as forex reserve scale is reasonable since nChinas special economic conditions nIts the result of BCA and BKA surplus, not the governments special policy. nA significant part of the reserve is foreign debt which should be return in future years. McGraw-Hill/Irwin Copyright 2001 by The McGraw-Hill Co
23、mpanies, Inc. All rights reserved. 4-22 Chinas Forex Reserve Scale lSome hold that Chinas reserve level is too high and it has some adverse effects. nThe RMB appreciation pressure nThe possibility of inflation nThe high opportunity costs nThe foreign exchange and interest risks McGraw-Hill/Irwin Cop
24、yright 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 4-23 The Current Situation of Chinas forex reserve management lA large part of the reserve is U.S.Dollar. lAbout 80% is used in purchasing US treasury bond. McGraw-Hill/Irwin Copyright 2001 by The McGraw-Hill Companies, Inc. All rig
25、hts reserved. 4-24 Chinas Forex Reserve Management lSome suggestions are raised nMake proper use of the reserve uEncourage foreign investment uEncourage investment in resources, like petroleum, and minerals nReduce the portion of USD and adjust the reserve structure nFurther promote the opening of the capital market nPromote the foreign exchange system reform and fulfill the complete convertibility of RMB currency.
