Management of foreign exchange reserves

For many countries, especially in the emerging markets, the official foreign exchange reserves are both a major national asset and a crucial tool of monetary and exchange rate policy. It is vital therefore that this national resource is used and
managed wisely and effectively.
Management of reserves is a complex and time-consuming business. It requires clear objectives, extensive delegation, strong control systems, open and transparent reporting and a realistic appreciation of the constraints faced. If conducted properly, openly and successfully it will greatly strengthen the public’s respect for and confidence in official policy, and can make a material contribution to successful macro-economic management.

Introduction...............................................................................................................3
1.Theoretical aspects of foreign exchange reserves.................................................4
1.1. Objectives and reasons for holding reserves...........................................4
1.2. The optimum size and ownership of the reserves....................................9
2. Delegation,control and reporting of foreign exchange reserves..........................12
2.1. Delegation and control...........................................................................12
2.2. The importance of reporting...................................................................17

3. Management of China's foreign exchange reserves............................................21
3.1. China's foreign exchange reserves and SAFE........................................21
3.2. Recommendations..................................................................................30
Conclusion...............................................................................................................36