Abstract
China's foreign exchange reserves exceeded 3000 billion dollars by the end of March, 2011. What disadvantages do huge, fast growing foreign exchange reserves have? What is the relationship between foreign exchange reserves, CPI and imbalanced income? This paper studies into the relationship between foreign exchange reserves and economic disequilibrium, using Eviews, the result of which shows that both CPI and average disposable income have positive correlation with foreign exchange reserves. Based on analysis of its evolving mechanism, suggestions for creative management of excessive foreign exchange reserves are put forward.
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