earticle

영어

Given the scale of foreign exchange reserve, the key problem in its management is how to allocate the currency structure. Based on the portfolio theory and using quadratic programming model, this paper get the main currency weight of China's foreign exchange reserves at first and give a further analysis using Heller-Knight model and Dooley model. The conclusion is that the U.S. dollar, Japanese yen, euro and pound are the main reserve currencies, the U.S. dollar and Japanese yen are the dominant ones currently. China should give comprehensive analysis on various factors which affect reserve currency structure and adjust it timely. In recent years, China’s huge foreign exchange reserves (FX reserves) have aroused wide concern and the amount reached to $3.95 trillion as of 2014 March. At present China’s FX reserves are invested in U.S. treasuries and are facing great risk of depreciation due to the QE of America and the European debt crisis. So it’s a key problem of how to allocate the reserve currencies in China. Based on the portfolio theory, Heller-Knight model and Dooley model, combined with the increase in China's economic development and foreign exchange reserves, this paper demonstrates in details the currency selection and allocation of foreign exchange reserves.