Advantages and Disadvantages of Continued Growth in Foreign Exchange Reserves

Abstract

Foreign exchange reserves are essential for an open economy. It is an important guarantee to make up for the balance of payments deficit, to intervene in the foreign exchange market, to maintain the exchange rate of the local currency, to repay the external debt and to maintain public confidence. However, the foreign exchange reserves are not as good as possible. China's foreign exchange reserves continued to grow and the high scale of concern, on the high foreign exchange reserves and inflation, the appreciation of the renminbi pressure, holding costs of more research. This paper first introduces the concept of foreign exchange reserves, and analyzes the root causes of the growth of China's foreign exchange reserves. Combined with previous research results to explore China's foreign exchange reserves continued to grow on the positive and negative effects of the economy.