Economics, Econometrics and Finance
8 years ago

China's Optimal Currency Shares in Foreign Reserves Ensure Stability and Growth

International management review
A Study on Foreign Reserve Management of China: Optimal Currency Shares in Reserve Assets
Yi Wu

Paper Summary

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The study looked at how China manages its large foreign reserves by optimizing the currency shares in its assets. Using a special framework, the researchers found that the optimal currency shares for China's foreign reserves are around 47%-58% in US dollars, 13%-18% in Japanese Yen, and 8%-10% in Euros. This helps China maximize the return on its reserves while reducing risks.