Foreign exchange reserve, also known as foreign exchange reserve, refers to the foreign exchange part of the international reserve assets held by a government, that is, the creditor's rights held by a government in foreign currency. It is an asset held by the national monetary authority and can be converted into foreign currency at any time. In a narrow sense, foreign exchange reserve is an important part of a country's economic strength, and it is a foreign exchange accumulation used by a country to balance international payments, stabilize exchange rates and repay foreign debts. Broadly speaking, foreign exchange reserves refer to assets denominated in foreign exchange, including cash, foreign bank deposits and foreign securities. Foreign exchange reserve is an important part of a country's international liquidity, which has an important influence on balancing international payments and stabilizing exchange rate. As most of China's foreign exchange reserves are in US dollars, the sharp appreciation of RMB and the sharp depreciation of the US dollar make the value of China's foreign exchange reserves shrink continuously, resulting in huge losses.

Excessive foreign exchange reserves will increase the pressure of RMB appreciation, affect foreign trade and induce investment capital to enter. In recent years, due to the continuous double surplus of China's international payments, foreign exchange reserves have accumulated year after year, and the pressure of RMB appreciation has increased. If a large amount of RMB is planted in the future, it will inevitably lead to the weakening of China's export competitiveness, the slowdown of export growth, the acceleration of imports and the reduction of trade surplus, which will not only weaken the stable foundation of foreign exchange reserves, but also affect domestic employment and the growth rate of the national economy. In addition, the RMB exchange rate has risen steadily, providing investors with a stable expected exchange rate. There are constantly "international hotline" capital sneaking into China for arbitrage and arbitrage activities, which leads to the expansion of foreign exchange reserves and the accumulation of many potential risks in the domestic asset market.