Nation Needs to Reform Its Foreign Exchange Reserves Management System

LI Yang1( 李扬 ), YIN Jianfeng（ 2 殷剑峰 ) and LIU Yuhui3( 刘煜辉 )

Editorial note：

In was in early 2007 that the People’s Bank of China (PBOC) announced another raise in RMB deposit reserve ratio (DRR) for financial institutions engaging in the deposit business. Unexpectedly, the market response has been rather indifferent with no clear signs of meeting the Bank’s expectation. This implies that it is hard to address the problem of excessive liquidity and withstand difficulties through sole reliance on monetary authority and existing policies and measures. This article, while analyzing the root causes of excessive liquidity, suggests two solutions for the Chinese Government; a “temporary solution” and a “permanent solution”.

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