The devaluation of the renminbi usually drives exports, which in turn increases foreign exchange reserves. Because devaluation makes "money worthless", then international capital will flow out in large quantities, resulting in a decrease in foreign exchange reserves. Moreover, if excessive or rapid depreciation will harm the overall economy, then the central bank will adjust market expectations and sell dollars in the spot market to prevent the daily spot exchange rate from excessively deviating from the middle price. Intervention in the foreign exchange market also means that foreign exchange reserves will be further reduced in the future.

Therefore, whether RMB depreciation will lead to shrinking foreign exchange reserves needs to be comprehensively measured. The domestic economy is closely related to the international economy, and it is not a simple devaluation that will increase or decrease foreign exchange reserves.

In vernacular Chinese, foreign exchange reserves are the dollar assets of a country and the total amount of foreign exchange and gold assets relative to the dollar, all of which are denominated in dollars. Foreign exchange reserve is a total concept, which is equivalent to the concepts of current assets and fixed assets in the company's balance sheet.

Advantages and disadvantages of RMB depreciation on international capital flow and national foreign exchange reserves;

1. A large number of international hot money (international speculators) fled, reducing the country's foreign exchange reserves.

International capital flows are often greatly influenced by exchange rates. When the devaluation of RMB becomes a persistent trend, domestic and foreign investors will try to hold foreign currency assets such as US dollars for preservation, which will convert a large amount of RMB into foreign currency, trigger a large outflow of domestic capital, and produce a "capital account balance deficit". At the same time, due to the conversion of RMB into foreign currency, the demand for foreign exchange is in short supply, which will further depreciate the RMB exchange rate.

International capital will continue to flee if the devaluation of the local currency continues unabated. After reaching a certain level, the country's foreign exchange reserves will be reduced, or even a deficit will appear, which will lead to a serious financial crisis, the country's reputation will be seriously damaged, and the domestic political economy will face serious difficulties.

The increase of export has increased the country's foreign exchange reserves.

As mentioned earlier, RMB depreciation will increase exports, increase the country's foreign exchange reserves, and produce a "current account surplus".

However, the depreciation of the local currency has a limit on the increase of exports, which mainly depends on the industrialization level of this country. If the level of industrialization is high, the depreciation of the local currency will obviously increase exports and foreign exchange, otherwise it will not be obvious.