For example, the exchange rate of US dollar against RMB is 827, and the US$ 654.38+0 billion flowing into China is equivalent to RMB 827 million. Now, if another $65.438+billion flows in, the Bank of China should have issued 827 million yuan to maintain the exchange rate of 827 RMB, which is $200 million: 654.38+06.54 RMB, but if it only issued 500 million RMB, it would be $200 million: 854 RMB. This is a situation in which the RMB exchange rate is allowed to fluctuate freely.

What China is facing now is: more and more dollars are pouring in, or the RMB is allowed to appreciate until it meets the market value. This will greatly reduce the existing foreign exchange reserves, plunder national wealth, and slow down China's export advantage (because RMB-denominated goods are more expensive after being converted into dollars), but it is beneficial to imports; Either the central bank will continue to increase the RMB to 827 million to maintain the original exchange rate in order to stabilize the exchange rate of 8.27, or issue less RMB, such as 8 1 100 million, so that the RMB will appreciate slightly. This is what China is doing at present, but there is still a question whether China really needs so much RMB appreciation when there is excess internal liquidity and the inflation trend is obvious. This is the current situation facing China.