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ReturnChina should keep a sufficient amount of forex reserves, expert
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admin
PublishDate：
2006-09-08 14:44:00
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Chinanews, Sept. 8 – In light of the high foreign exchange reserves, Pei Changhong, director of the Finance and Trade Institute under the Chinese Academy of Social Sciences said recently that for a large developing country like China, keeping a sufficient amount of foreign exchange reserves is good for the country in its transformation from planned economy to market economy.
First, keeping a large amount of foreign exchange reserves is conducive to China’s international payment capability. China is already a big importer of energy resources and raw materials, and will remain as such in future. The large amount of foreign exchange will help China to withstand possible risks in the market. China holds a large number of debts in foreign exchange and many foreign enterprises in China need to transfer their profit abroad. These require that China should keep enough foreign exchange reserves.
Second, China will gradually open its capital account for international payment. In order to deal with uncertainties arising from capital flow in the international market, China needs to have enough foreign exchange reserves.
The large amount of foreign exchange reserves is conducive for Chinese enterprises to make investment abroad. If Chinese enterprises want to make investment in a foreign country, they will need foreign exchange. If China wants to increase its resource and technology supply for economic construction and to expand the market overseas, China should encourage domestic companies to make investment abroad. Without sufficient foreign exchange reserves, it would be difficult for China to sustain the outflow of capital.
Lastly, sufficient foreign exchange reserves are essential for the credit of Renminbi’ in the international market. They are also important for the Hong Kong monetary scheme and for the stability of currency.
“Sufficient foreign exchange reserves are a good thing. However, it would be wrong to think that the higher foreign exchange reserves are, the better. When a thing reaches its extreme, it turns into its opposite,” Pei warned.
First, keeping a large amount of foreign exchange reserves is conducive to China’s international payment capability. China is already a big importer of energy resources and raw materials, and will remain as such in future. The large amount of foreign exchange will help China to withstand possible risks in the market. China holds a large number of debts in foreign exchange and many foreign enterprises in China need to transfer their profit abroad. These require that China should keep enough foreign exchange reserves.
Second, China will gradually open its capital account for international payment. In order to deal with uncertainties arising from capital flow in the international market, China needs to have enough foreign exchange reserves.
The large amount of foreign exchange reserves is conducive for Chinese enterprises to make investment abroad. If Chinese enterprises want to make investment in a foreign country, they will need foreign exchange. If China wants to increase its resource and technology supply for economic construction and to expand the market overseas, China should encourage domestic companies to make investment abroad. Without sufficient foreign exchange reserves, it would be difficult for China to sustain the outflow of capital.
Lastly, sufficient foreign exchange reserves are essential for the credit of Renminbi’ in the international market. They are also important for the Hong Kong monetary scheme and for the stability of currency.
“Sufficient foreign exchange reserves are a good thing. However, it would be wrong to think that the higher foreign exchange reserves are, the better. When a thing reaches its extreme, it turns into its opposite,” Pei warned.
