A large surplus means that exports exceed imports, in other words, foreign currency inflows exceed outflows, which will inevitably lead to an increase in foreign exchange reserves. The way to deal with the massive inflow of foreign currency is either the rapid appreciation of the local currency or the increase of currency circulation.

At present, the appreciation rate of RMB is still quite slow compared with the growth rate of trade surplus. Therefore, the Bank of China has to increase the domestic money supply to buy the inflow of foreign currency. There are two ways to increase: issuing bank notes and issuing short-term central bank bills. Increasing the money supply itself will promote a new round of investment boom, either directly or through the banking system, thus increasing the output of enterprises, accompanied by a larger trade surplus. If the trade surplus cannot be narrowed, they are unlikely to slow down in money supply growth, loan growth and investment activities.