Four types of ways to rationally use foreign exchange reserves
The first is to realize the market-oriented private use of part of the foreign exchange reserves through the reduction of the scale of foreign exchange reserves. The basic idea is that the central bank sells foreign exchange reserves to the public and takes back the RMB. The sold foreign exchange reserves remain in the hands of the public and are independently managed and operated by professional companies, departments or private individuals. For example, enterprises are encouraged to use their own RMB to buy foreign exchange and import advanced foreign technology, equipment and strategic materials, and the price of foreign exchange purchases can be discounted to varying degrees according to the urgency and importance of national strategic needs. For another example, we can promote the establishment of a "strategic material investment company" - raising funds from the private sector to buy foreign exchange through the issuance of stocks and bonds, and then the strategic material investment company will conduct relevant operations independently. People who have different views on the future price of strategic materials are free to choose. Those who are "long" can buy the stocks of investment companies, and those who are "short" can not buy or even short-sell the stocks.
The second is to reasonably expand investment channels for the foreign exchange reserves that are non-fiscal funds. The basic idea is to adopt a more active investment portfolio strategy and expand the channels for using foreign exchange reserves while maintaining the liquidity and security of foreign exchange reserves. Conservative investments include European and American sovereign bonds and financial bonds, relatively active investments involve other securities with average credit ratings, and more active investments can involve corporate equity and real estate. When expanding your investment portfolio, you should learn from international experience and choose carefully. List a few ways to use assets that don’t get enough attention. For example, in 1996, our country had designated foreign exchange banks to lend foreign exchange reserves to commercial institutions. Now we can consider doing this again to reduce losses from high-interest borrowing and low-interest investment in U.S. Treasury bonds at the same time. For another example, considering that developing countries are not satisfied with the loan procedures and conditions of the International Monetary Fund, they can use part of their reserves to provide loans to them. For another example, we can consider transferring part of the foreign exchange reserves to other assets of the central bank, supporting financial reforms through capital injection and other methods, and exploring the possibility of expanding investment areas. However, whether various types of investments are operated directly by the central bank or entrusted to operate them, you need to weigh the pros and cons and make good plans.
The third is to explore the fiscal use of the foreign exchange reserves that are fiscal funds, which can be consumed or transferred. The basic idea is to convert the central bank's "seigniorage" foreign exchange reserves into fiscal funds. There are two methods of operation. 1. The central bank sells foreign exchange reserves to the public (although the public’s willingness to hold foreign exchange reserves decreases under the expectation of RMB appreciation, the public will still have demand for foreign exchange for the purpose of asset diversification), and then uses the proceeds to purchase foreign exchange reserves issued by the Ministry of Finance. For treasury bonds, the Ministry of Finance obtains RMB funds and spends them as fiscal funds, but this method must ensure that no secondary settlement of foreign exchange occurs; 2. The central bank directly uses foreign exchange to purchase special treasury bonds issued by the Ministry of Finance, and the foreign exchange obtained by the Ministry of Finance is Can be spent as financial funds. Our country's government investment in infrastructure, education, medical care, social security, environmental protection, etc. is relatively low, and the finance can use the foreign exchange obtained to import related materials and equipment.
The fourth is the fiscal use of investment income from foreign exchange reserves. The investment income from foreign exchange reserves is directly expressed as fiscal revenue and can be used as fiscal funds.