First, under the background of global balance of payments imbalance, the United States has become the world's largest borrower because of its persistent current account deficit; Most East Asian countries, including China, have become international creditors due to their persistent current account surpluses. The high foreign exchange reserve is only the external manifestation of global balance of payments imbalance in China.
The internal cause of this global imbalance is the decline of American national savings, which is less than domestic investment and has to borrow a lot from other countries. Because high savings cannot be effectively converted into domestic investment, East Asian countries have become the financing source of high deficit in the United States.
From a global perspective, the international creditor status of East Asian countries, including China, makes the United States an international debtor. Different from the structure of capital outflow in developed countries such as the United States, a large number of capital outflows in China are not private capital outflows, but official capital outflows that are not directly reflected in China's balance of payments, that is, the so-called foreign investment in foreign exchange reserve assets. It can be said that China's high foreign exchange reserves are only the external manifestations of global imbalances in China.
Second, the arrangement of the international monetary system makes China face a "high savings dilemma".
After the Bretton Woods system, the US dollar is still the de facto standard currency and the most important reserve currency. Almost all East Asian countries' intra-regional trade and most of their trade with countries outside the region are denominated in US dollars. Mckinnon, the founder of contemporary financial development theory and a professor at Stanford University in the United States, believes that any international creditor country that cannot provide credit in local currency will have a currency mismatch problem, which will lead to a "high savings dilemma": on the one hand, with the accumulation of dollar claims, dollar asset holders will become more and more worried about the constant conversion of dollar assets into local currency assets, forcing the local currency to appreciate; On the other hand, countries with trade deficits will also complain that the trade surplus is caused by currency undervaluation and currency manipulation. As an international creditor, China cannot provide credit in local currency, and its creditor's rights cannot be denominated in local currency. Only a large number of US dollar assets can be held, and the accumulation of reserve assets causes pressure on RMB appreciation. Under the expectation of RMB appreciation, a large amount of capital inflows further increased the reserve assets. Once the RMB appreciates, the huge reserve assets will suffer exchange losses.
Therefore, under the arrangement of the current international monetary system, huge foreign exchange reserves are the guarantee to maintain confidence in the value of RMB, at the cost of bearing the risk of dollar depreciation.
Third, the continuous accumulation of foreign exchange reserves reflects the enhancement of China's trade competitiveness and attractiveness to foreign investment, and also reflects the long-term "biased" foreign trade, foreign investment and foreign exchange management policies.
Judging from the source of China's foreign exchange reserves, the double surplus of current account and capital account is the direct reason for the increase of China's foreign exchange reserves. The double surplus of current account and capital account reflects the enhancement of China's trade competitiveness and foreign investment attraction since the reform and opening up. However, at present, as a developing country, due to the deviation of neutral foreign investment and foreign trade policies such as export tax rebate policy, tariff policy, preferential tax policy for foreign investment and differential income tax policy between domestic and foreign investment, a large number of high-quality factor resources flow to foreign investment and foreign economic sectors, resulting in excessive dependence on foreign demand and foreign economy, and the disadvantages of extensive export-oriented economic growth model are prominent.
In the aspect of capital account control, China's asymmetric control structure of "lenient entry and strict exit" and restricted exchange have suppressed the demand for foreign exchange and contributed to the imbalance of international payments.
Fourth, the RMB exchange rate deviates from the equilibrium exchange rate to a certain extent, distorting the prices of domestic and foreign products, traded and non-traded goods, RMB assets and US dollar assets, resulting in a sustained trade surplus and resource mismatch.
As a special variable linking domestic and foreign economies, the deviation of exchange rate will inevitably lead to arbitrage of domestic and foreign goods, distort the prices of domestic and foreign products, trade and non-trade goods, RMB assets and US dollar assets, and cause unreasonable interest orientation and resource mismatch.
At present, although experts and scholars at home and abroad have great differences on the calculation results of RMB equilibrium exchange rate, they have basically reached the understanding that there is a certain degree of deviation in RMB. For example, an undervalued exchange rate makes China products cheaper. It is profitable to buy in China and sell abroad, while buying abroad and selling in China will suffer. That is to say, an undervalued exchange rate is beneficial to exports and unfavorable to imports; On the other hand, when the exchange rate is undervalued, encouraging imports to reduce foreign exchange reserves is actually encouraging domestic enterprises to do business at a loss. It can be seen that the domestic and international commodity prices and arbitrage opportunities formed by exchange rate deviation are one of the important reasons for China's sustained trade surplus.
In addition, the exchange rate deviation also makes the price of tradable goods relatively high, which makes the production of tradable goods more favorable and the production of nontradable goods relatively unfavorable, resulting in a large number of resources flowing to the trade sector; Judging from the asset prices at home and abroad, if RMB assets are converted into US dollar assets at an undervalued exchange rate, the real value will depreciate, which is also one of the obstacles for China enterprises to "go global".
Fifth, the "inflated" foreign exchange reserves caused by short-term speculative capital inflows due to the expectation of exchange rate appreciation further amplified the pressure of RMB appreciation.
If most people think that the RMB exchange rate is undervalued, there is definitely an expectation of appreciation. The expectation of appreciation stimulated a large inflow of capital, which led to a substantial increase in short-term foreign debt, which increased by 38. 1% and 35.4% in 2003 and 2004, accounting for 39.8% and 45.63% of the foreign debt balance, respectively. In addition, a large number of hidden capital inflows have also increased significantly. According to the author's calculation, the inflow reached more than 40 billion US dollars in 2004, reaching its peak; In 2005, influenced by the interest rate increase in the United States, the hidden capital inflow decreased significantly.
Speculative short-term capital has become an important factor to promote the extraordinary growth of China's foreign exchange reserves. Different from trade, the foreign exchange reserve formed by capital inflow is debt reserve, which not only needs to repay the principal, pay interest or repatriate profits, but also brings "inflated" foreign exchange reserve due to its great instability. This "inflated" has further strengthened the expectation of RMB appreciation.
Sixth, the continuous accumulation of foreign exchange reserves shows that the central bank has increased its intervention in the foreign exchange market.
In order to maintain the exchange rate target, the central bank buys foreign exchange in the foreign exchange market and puts in a large amount of base currency at the same time. It can also be said that the central bank has converted a large number of foreign currency assets by issuing paper money or borrowing (such as issuing central bank bills), forming the reserve assets of the central bank. Since 200 1, the proportion of foreign exchange in the base currency has increased year by year, reaching 78% in 2004. In the first half of 2005, foreign exchange accounted for 875.8 billion yuan, accounting for 95.4% of the base currency in the same period.
Based on the above analysis, we should be able to answer the question: Are reserve assets wealth created by the central bank? Is it wealth that the government or enterprises can use? Obviously not. If so, it's only on the books at most. On the balance sheet of the central bank, the corresponding "source" of reserve assets is the central bank's liabilities to banks; On the balance sheet of the whole banking system, the corresponding "source" of reserve assets is the liabilities of the banking system to residents (cash and bank deposits).
At present, there are various suggestions to consume reserve assets, including giving them to domestic enterprises, investing in social undertakings and converting them into physical reserves. But in theory, if you use reserve assets directly instead of RMB for foreign exchange, it is similar to printing money for financing; The use of reserve assets, if not imported from or invested in foreign countries, still does not play a role in consuming official reserve assets. Therefore, how to use the reserve assets requires a clearer understanding of foreign exchange reserves.
In fact, there are only two ways to reduce official reserve assets: expanding imports, reducing exports, increasing foreign investment and reducing foreign investment. There should be no third way.
2. What is the structure of China's huge foreign exchange reserves?
Cheng Siwei said that the amount of foreign exchange reserves should be adjusted on the premise of meeting the strategic and tactical reserves, the restrictions on foreign exchange purchase by enterprises and residents should be moderately relaxed, and enterprises should be encouraged to use RMB assets as collateral to invest in foreign countries. "This is one of the ways to ease liquidity." Cheng Siwei said.
In terms of reserve structure, Cheng Siwei said that the devaluation of weak currencies should be compensated by the appreciation of strong currencies. At present, the euro is appreciating against RMB, while the dollar is depreciating against RMB. The combination of the two can effectively make up for it. But he later said that this did not mean that China should buy more euros.
Cheng Siwei said that since the beginning of this year, the central bank has raised interest rates and deposit reserve ratio several times, and the Ministry of Finance has also taken measures such as increasing transaction stamp duty. However, due to the lack of consumer loans, the interest rate hike is not enough to regulate the stock market and the property market, which leads to the regulation policy has little impact on the rise of the domestic stock market and the property market. He attributed the rise in the prices of assets such as stocks and houses to excess liquidity. At the same time, he warned: "Excess liquidity may still turn the economy from rapid to overheated."
"Excess liquidity is a manifestation of local market failure, and macro-control should be moderate and effective according to law. Macro-control should not violate the laws of value, supply and demand and competition in the market economy. Its measures should be able to guide enterprises and individuals to change their expectations and thus change their behavior. " Cheng Siwei said.
He pointed out that in the stock market, it is necessary to encourage outstanding overseas stocks to return, speed up the listing of outstanding domestic enterprises, gradually lift the ban on non-tradable shares in accordance with the share reform agreement, increase effective supply, and alleviate excess liquidity. It is understood that this "increasing the stock market supply to solve the problem of excess liquidity" is Cheng Siwei's consistent view.
4. What is the impact of China's huge foreign exchange reserves?
Excessive foreign exchange reserves have increased the appreciation pressure of RMB exchange rate.
Due to the continuous double surplus of China's international payments, foreign exchange reserves have accumulated year after year. Politically, the pressure of RMB appreciation has increased, and many countries in the United States, Japan and the European Union have demanded RMB appreciation on different occasions. The textile trade dispute between China and the United States and China and Europe since May 2005 is a reflection of these negative effects.
Excessive foreign exchange reserves will exert strong speculative pressure on the exchange rate.
Theoretically speaking, the appreciation of local currency is inevitable when the balance of payments continues to be in surplus and foreign exchange reserves continue to rise. The expectation of RMB appreciation may lead to a large number of short-term capital inflows, which will bring many uncertainties to China's economic development: First, it will have an impact on the balance of payments; Secondly, it is more difficult for the central government to manipulate monetary policy, which directly leads to the increase of China's base money; Finally, a large amount of speculative capital may be invested in real estate and other industries to wait for the appreciation of the renminbi, triggering an economic "bubble".
This can be seen from the changes of net omissions and errors in China's balance of payments. Before 2002, most of China's net omissions and errors were in the borrower, and after 2002, they all appeared in the lender. There are mistakes and omissions in compiling the balance of payments in any country. Simply put, net errors and omissions are equivalent to capital flight when the borrower appears, and "hot money" inflows when the lender appears.
Huge foreign exchange reserves will make China lose preferential loans from the International Monetary Fund.
According to the relevant regulations of the IMF, when a member country has a foreign exchange balance deficit, it can withdraw a low-interest loan equivalent to its share from the "trust fund". If member countries need to adjust their production and trade, they can also get medium-and long-term loans equivalent to their share 160%, and the interest rate is more favorable. On the contrary, countries with sufficient foreign exchange reserves not only can't enjoy these preferential low-interest loans, but also must provide help to countries with balance of payments difficulties when necessary.
How to use China's huge foreign exchange reserves?
Adopt a diversified portfolio strategy.
By the end of June 2005, China had invested US$ 485 billion in US long-term bonds, accounting for 68% of China's foreign exchange reserves at that time. Among them, 57% invested in US Treasury bonds, 36% invested in US government agency bonds and 7% invested in US corporate bonds.
Compared with other countries and regions, the high proportion of China's investment in US Treasury bonds shows that China pays too much attention to the safety of its long-term debt investment in the United States and ignores the rate of return. The biggest problem of China's investment in American securities is that the proportion of investment equity is too low, only 0.47%. In contrast, Japan is 16%, Britain is 47%, and Canada is 72%. Compared with emerging market economies in Asia, China has the lowest proportion of overseas equity investment, for example, 62% in Singapore and 0.9% in South Korea.
Our government pays attention to debt investment and ignores equity investment; Pay attention to national debt and ignore institutional debt and corporate debt; Emphasis on credit currency investment, ignoring gold investment; Emphasis on safety and liquidity, ignoring profitability. At present, China's foreign exchange reserves have far exceeded the requirements of adequacy and rationality, whether measured by the index of foreign exchange reserves meeting import demand or by short-term solvency. Therefore, it is imperative to improve the profitability of foreign exchange reserve assets.
In order to effectively spread risks, you can also invest in currencies that are relatively strong in the near future, such as the euro, increase their proportion in the total foreign exchange reserves, and hedge some risks. Strengthen investment and create economic benefits. Put part of foreign exchange reserves into foreign funds, bonds, real estate and other investment channels to obtain income, so as to make better use of foreign exchange reserves.
(2) Encourage enterprises that are competitive in the international market to implement the "going out" strategy.
An important reason for the formation of China's huge foreign exchange reserves is the asymmetry between foreign investment in China and China's foreign investment. Therefore, we should actively implement the "going out" strategy, make use of the country's abundant foreign exchange reserves, appropriately relax the restrictions on the use of foreign exchange for enterprises to "go out" and encourage enterprises to invest abroad. Accelerate the pace of "going out" of enterprises. The state can also use foreign exchange reserves to set up a "strategic development investment fund", which can not only make strategic overseas investments in industries that have an important impact on China's sustained economic growth, but also make strategic investments in China's domestic infrastructure, natural resources, education, scientific research and other fields. The former is a strategic investment in China's sustained economic growth in the form of going global, while the latter is a direct government investment aimed at China's long-term economic development.
In this regard, the Forum on China-Africa Cooperation has taken a pragmatic step, encouraging and supporting China enterprises to expand their investment in Africa, further participating in Africa's agricultural infrastructure construction, agricultural machinery production and agricultural products processing industry, and making efforts to strengthen cooperation between small and medium-sized enterprises of the two sides, promote industrial development in Africa, enhance their production and export capabilities, and promote the expansion of investment in Africa. It is decided to support relevant banks in China to set up china-africa development fund, with the total fund reaching 5 billion US dollars gradually, and to encourage and support powerful and reputable China enterprises to invest in Africa. It has been noted that infrastructure construction plays an important role in Africa's development by setting up projects that are conducive to improving the technical level of African countries, increasing employment and promoting the sustainable development of local economy and society. China continues to focus on infrastructure construction, especially transportation, communication, water conservancy, electricity and other facilities.
(3) Consider converting foreign exchange reserves into oil, gold and other material reserves.
In due course, foreign exchange reserves will be converted into oil, gold and other material reserves. In terms of gold, China's gold reserves were 600 tons at the end of September 2005, while China's gold reserves accounted for a low proportion of foreign exchange reserves. Some experts suggested that the gold reserve should be increased to 3% ~ 6% of the foreign exchange reserve. In terms of oil, China has become the second largest oil consumer after the United States. The dependence of oil on foreign countries is 47%, and the reserve should be kept as a strategic reserve for 90 days.