The External Storage Management Reform Needs &Nbsp First.

The near future,

There have been many problems in the management of foreign exchange reserves and the diversification of investment varieties. If we want to push ahead with the reform smoothly, we need to make a name first.

First, it is clear that foreign exchange reserves should be allocated to the people and public assets. The goal of foreign exchange reserve investment is to maximize the public interest.

Second, the foreign exchange reserve asset management department is an escrow department, which needs to make clear the foreign exchange reserve investment strategy and investment income to the public, and the major management decisions in the future will be subject to public supervision.

If the name is not correct, the diversification of foreign exchange reserves will be blinded from the beginning, and the overall investment strategy target is not clear. The management structure and incentive mechanism design of the management organization will be very problematic.

Superman company

China's foreign exchange reserve management body is the Reserve Department of the foreign exchange reserve administration. Now it is called the central foreign exchange business center of the foreign exchange reserve administration.

This center is incredible. It's a superman company.

The establishment of two or three hundred people also manages the foreign exchange assets valued at US $three trillion. On average, each person manages about ten billion US dollars. On average, everyone has the same amount of money as a foreign exchange investment fund on Wall Street.

Two or three hundred people manage foreign exchange assets of US $three trillion, and we also have high level of security and liquidity requirements for the assets they invested. The main target of investment is only a few fixed income products. The main body is treasury bonds and institutional bonds of the United States and the euro area.

It is thought that even if the requirements of security and liquidity of the central foreign exchange business center are not raised, the manpower of two or three hundred people, even the work of Superman, can not bring substantial changes to the current investment structure unless there is a large-scale diversification of entrusted financial management.

Rely on heaven to eat

At present, the investment income of US $three trillion in foreign exchange assets is basically dependent on heaven.

Mainly look at the face of the Federal Reserve and the international financial market environment.

If the financial market hates junk bonds and stocks, we will hedge against the risk of US dollar bonds. The price of US dollar treasury bonds has risen sharply, and the value of foreign exchange reserves based on US dollar bonds has also risen. This is what we had experienced during the financial crisis, but it didn't last long.

If the Fed insists on the easing of the dollar, the depreciation of the dollar and global inflation, the value of foreign exchange reserves will shrink. This is the test we are experiencing now, and the test is not over yet.

Relying on heaven is not a problem.

The question now is whether or not treasury bonds can be insured.

In view of the current level of US fiscal deficit and the trend of future development, Rating firm's failure to downgrade US Treasury bonds has given the US government face.

If the US fiscal position is placed in other countries, it should be demoted.

In 2010, the US federal government was seriously unable to make ends meet, earning 2 trillion and 200 billion and spending 3 trillion and 500 billion. The fiscal deficit of that year was 1 trillion and 300 billion, accounting for 9% of GDP in that year.

On the stock side, US public debt totaled 14 trillion and 260 billion US dollars in 2010, accounting for 97.3% of GDP in fiscal year 2010.

Worse still, if the United States fails to introduce timely large-scale spending cuts, social security, health insurance and employment insurance will continue to grow substantially in the future, and interest payments for debt will also increase sharply, and the deficit will be further enlarged.

All these deficits need to be made up by issuing bonds, and the fate of US Treasuries can be imagined.

Even if the United States takes serious action against the deficit problem, the Fed will have to cooperate with a moderate inflation strategy.

Inflation is the best way to get rid of debt. It not only stimulates GDP growth, expands the tax base, but also reduces the actual purchasing power of debt.

Whether the US is issuing additional treasury bonds or inflation, it is shrinking the purchasing power of China's foreign exchange reserve assets.

As we all see, academics and officials are constantly worried.

Promoting the diversification of foreign exchange reserve management has become a consensus. However, there has been controversy in the way of specific operation.

The main reason for so much controversy is the foreign exchange reserve's money, who should manage and how to diversify.

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Be taken from the people

Three trillion of the foreign exchange reserves are bought by the monetary authorities in the foreign exchange market.

The Renminbi issued by the monetary authority is called a seigniorage, which is a disguised tax.

The monetary authorities will lose the purchasing power of the original Renminbi holding RMB in each yuan, so the issuing of currency by the monetary authority is a disguised and covert tax.

The source of foreign exchange reserves can be understood as government taxation and assets purchased with tax money.

The reality is more complicated than the above, but the essence of the problem has not changed.

The central bank has too much money to buy foreign exchange reserves through issuing renminbi, which exceeds the need to maintain price stability.

Therefore, when the currency authorities issued money, they also recovered part of the currency by issuing central bank bills.

That is to say, the monetary authorities did not issue so much money to buy foreign exchange, but they bought foreign currencies through the way of borrowing money after the established currency was issued.

There are only two ways for the central bank to repay its debts. One is the currency issued in the future, the future seigniorage, the two is the financial capital, and the final source is tax.

The situation in foreign countries is slightly different from that in China, but the same is true in nature.

Most countries use the Treasury bonds and tax money to buy foreign exchange, and the central bank buys treasury bonds issued by the Ministry of finance.

Compared with China, the operation of foreign countries has more than one bond link, but after much of this link, the burden of the central bank is lighter, and the ownership and management of foreign exchange reserves are clearer.

$three trillion in foreign exchange assets is a large sum of money, which is bought by the government through taxation. The reasons are mainly for the following reasons: firstly, seigniorage is very concealed, and it is a way of collecting the wealth of ordinary people through inflation. It is not like the direct deduction of taxes by the Inland Revenue Department; two, the seigniorage collected by the monetary authorities has not been turned over to the public finance, but has bought foreign exchange, which means that the financial authorities have reduced the corresponding income and expenditure. We often do not pay enough money for the government to spend less on ourselves. Three, the debt corresponding to the central bank is overdrawn in the future seigniorage, or is not perceptible.

In a word, foreign exchange reserves are foreign assets bought by the government in the past, now and in the future, which are maintained by the government but are ultimately taken from the people.

It can also be simply understood that foreign exchange reserves are the money that the government saves for the people.

Used in the people

Foreign exchange reserves should be used for the sake of the people.

Investment has always been profitable and compensable, and foreign exchange reserve management institutions can not guarantee that they will make money.

In order for foreign exchange reserve managers to sit steady and let go, at least clear the following points:

(1) foreign exchange reserves are public assets, and foreign exchange reserves should be maximized by maximizing public interests.

The goal may be to maximize the purchasing power of imported goods and services in the future, or to protect China's future terms of trade.

Managers of foreign exchange reserves need to take into consideration the changes in the age structure of China's population, the fundamental economic changes and the changes in the external environment in the future.

The objectives of foreign exchange reserve management are different from those of general commercial investment institutions, nor are they applicable to the evaluation criteria of commercial institutions' investment. This is the most urgent and important research work of foreign exchange reserve managers.

(2) the foreign exchange reserve asset management department is an escrow department, which needs to explain the foreign exchange reserve investment strategy and investment income to the public clearly and accept public supervision.

There is a view that public representatives may not have enough professional knowledge and can not help form better investment decisions.

However, public representatives can make up for defects in professional knowledge by setting up expert committees and convening expert hearings.

More importantly, the supervision of public representatives has improved the legality and legitimacy of foreign exchange reserve management departments, and even if losses can be explained, managers can relax their hands and feet for investment. Public representatives' supervision also helps to prevent foreign exchange reserve assets from serving the interests of departments.

In principle, since foreign exchange reserves are assets purchased by the government for tax purposes, it is the money that the government saves for the people. It can distribute some of the foreign exchange assets to the public.

In the past, there was a proposal to distribute foreign exchange reserves to the public, which was difficult to operate.

After the foreign exchange reserves are divided, the monetary authorities, in order to maintain the exchange rate target, will also collect the foreign exchange that has been separated by a large part through intervening the foreign exchange market, and the foreign exchange returned to the monetary authority will become foreign exchange reserves. The final result is that the monetary authorities will issue renminbi to all of them, and the foreign exchange reserves will not be separated.

Despite this problem, there is a flexible way to distribute foreign exchange reserves to the public.

A very reliable way is to divestiture half of the foreign exchange reserves and set up a sovereign pension fund focused on overseas investment.

At the same time, the law clearly stipulates that this sovereign pension fund is subject to the supervision of the public, and the future investment income will eventually be allocated to each citizen through the way of enriching the pension account.

In fact, this is also the allocation of foreign exchange reserves to the public.

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Pluralistic reform

The diversification of foreign exchange reserve management institutions and investment instruments should serve the purpose of foreign exchange reserves for the people.

The technical question is what kind of diversification is the best way to achieve the goal.

Is it the Ministry of finance, the central bank, or the CIC?

Like the market rumors, in the foreign exchange assets pool, according to the category of commodities, such as energy, precious metals and other classified investment funds, or according to the regional division, such as the United States fund, euro zone fund, East Asia Fund, Africa Fund and other classified investment funds.

From the experience of recent years, it is very attractive to invest in energy and precious metals. But is it necessary for China to import so much energy and metals in twenty years? Is the value of these investments twenty years better than those invested in real estate in Mumbai, India or in Nasdaq?

These questions are difficult to answer. Although there are no accurate answers, there are still some principles.

First, the top management institutions of foreign exchange reserves should not be dispersed.

There is a big housekeeper in the management of foreign exchange reserves. The task of big housekeeper is to study what kind of investment strategy is more in line with the maximization of public interest in China in the future. This requires a comprehensive understanding.

Under this understanding, the housekeeper allocated foreign exchange assets to the sub fund and Sun Tzu fund to achieve a unified investment target.

There is no doubt that the competition mechanism is very important and is the fundamental guarantee for efficiency, but the competition mechanism is mainly in the sub fund and Sun Tzu fund level, not the top management level.

The top management should be a research department, mainly considering what is the investment target that is in line with the future public interest, how to adjust the target according to the environmental changes, and the allocation of funds on different large plates, so as not to be responsible for specific investment projects.

For the current situation in China, the central bank set up a foreign exchange investment fund outside the traditional reserve assets function, or the [1] of the CIC after reform.

Second, as far as possible, with the help of private financial institutions, we should accelerate the diversification of investment entities and investment varieties.

The reason why this principle is very simple is that it is impossible for the public sector to operate such a huge amount of foreign exchange funds, so it is impossible to diversify the investment variety. The difficulty of diversification is the biggest threat to China's foreign exchange reserves.

Finally, it is unavoidable to say something in a commonplace.

Buying foreign exchange in the foreign exchange market for a long time and a large scale is a very bad thing for the government or for the public.

For the government, there will be a better way to buy RMB for foreign exchange, and foreign exchange earnings will be difficult to get high returns.

For the public, the low exchange rate of the RMB not only weakened the real purchasing power of the renminbi, but also distorted the allocation of resources and aggravated welfare losses.

Stock management of foreign exchange reserves is important. Reducing foreign exchange market intervention and controlling the increment of foreign exchange reserves is more urgent and important.