If there is a large amount of foreign exchange inflow, we will profit from the transaction, and the inflow means more income, but at the same time, the inflow of foreign exchange will also bring us the risk of exchange rate changes. China's foreign exchange reserves now rank first in the world. In this regard, after the depreciation of the US dollar, China's foreign exchange reserves have shrunk dramatically, which is the unfavorable side brought by the massive inflow of foreign exchange to China.
Foreign exchange outflow means that we are consumers. If there is more outflow, we will spend more and more, but at the same time, the reduction of our foreign exchange reserves will correspondingly reduce the risks brought by exchange rate changes.
Hot money, that is, hot money, refers to short-term assets that flow between financial markets in pursuit of high profits. It has the characteristics of strong speculation, fast liquidity and obvious tendency. Because of its frequent transfer around the world, it is also called hot money, just like hot money. During the great crisis in 1930s, it existed in large quantities, which did great harm to the financial stability of some countries.