For example, 1 started asking for dollars. This has increased the demand for RMB in the market. No one in the market wants RMB, so they throw a lot of dollars in the market to buy RMB. This can be explained by the relationship between supply and demand in which the exchange rate was the ratio of the two countries' currencies, so the Bank of China increased its relative demand for US dollars through the foreign exchange market. To put it bluntly, now that the RMB has depreciated to 7 for some reason, that is, 1, the market demand for RMB has decreased, making the RMB valuable again relative to the US dollar:

Suppose the exchange rate of RMB against the US dollar is 6.

2. To put it simply, when foreign exchange reserves increase and foreign exchange supply increases, foreign exchange becomes cheaper and depreciates relative to RMB. For example, the supply of potatoes in the vegetable market increases, and the price naturally drops. Original price 1 yuan/1 kg, now 1 yuan/kg. Potatoes are still potatoes, but money seems to be more valuable than before. However, China's long-term foreign exchange control and exchange rate strategy make the true linear relationship between foreign exchange reserves and exchange rate not reflected. At present, China's foreign exchange reserves are mainly invested in overseas high-credit government bonds, international financial organization bonds, government agency bonds and corporate bonds, and the management has always adhered to the business philosophy of long-term and strategic development. The holding and use of private foreign exchange is not common, and the problems here are very complicated.

3. Foreign exchange reserves are mainly foreign currency assets held by the government, which are used for investment and financial transactions when necessary to support the local currency exchange rate.

Theoretically, every country will maintain a certain amount of foreign exchange reserves. As for the amount of foreign exchange reserves, it depends on its national economic factors, such as the scale and speed of national economic development, the degree of economic openness, the development of foreign trade, the ability to use foreign capital and international financing, and the national macro-control ability.

When the foreign exchange market is in a state of oversupply, the mainland will release RMB to absorb the excess foreign exchange supply in the market, and the absorbed foreign exchange will be allocated to foreign exchange reserves. Therefore, the mainland's foreign exchange reserves have continued to increase for many years, and now the total foreign exchange reserves in the mainland rank first in the world.

Holding a large amount of foreign exchange reserves has advantages and disadvantages for a country, because the economic factors of each country are different, so there is no absolute standard. To judge whether a country's foreign exchange reserves are surplus or insufficient, the first condition is to understand the country's economic factors and development direction. Please refer to Huilong for more information. Com foreign exchange.