The so-called foreign exchange appropriation is actually the corresponding domestic currency invested by the central bank of the funded country to purchase foreign exchange assets. For example, RMB is not freely convertible and can only be used in circulation after the introduction of foreign capital. The central bank needs to invest in foreign exchange in its own currency, thus forming a foreign exchange account. Some people think that the decline in foreign exchange holdings means that the central bank has got rid of the burden of foreign exchange holdings and the dilemma of being forced to issue central bank bills, raise the deposit reserve ratio and continue to flow. On the other hand, with the decline of foreign exchange, the original money supply mechanism will be "stuck", and what will be used to replace the dilemma of foreign exchange.

With the continuous reduction of foreign exchange funds, the domestic financial market may face more serious liquidity pressure. The decline in foreign exchange funds means that the domestic money supply is reduced and the inflationary pressure is alleviated to some extent. In addition, reducing the occupation of foreign exchange will affect the confidence of China's domestic capital market, especially the stability of the financial market represented by the stock market. The decline in foreign exchange holdings means a decrease in export commodities. The goods exported by China are all products with low added value, and export enterprises are more vulnerable to the impact of the international market and close down. Therefore, the central bank is more likely to adopt a loose monetary policy.

To put it simply, the reduction of foreign exchange accounts is equivalent to the tightening monetary policy implemented by the central bank, and the inflation rate has dropped. At the same time, domestic liquidity is tight, interest rates remain unchanged, real interest rates rise, and investment is controlled. Prior to this, foreign exchange holdings were usually regarded as the main channel to provide liquidity to the market. Increasing means injecting liquidity, while decreasing means the opposite. Generally speaking, the decline in foreign exchange holdings means that the inflation rate will drop, the interest rate will remain unchanged, and the real interest rate will rise, which will inhibit investment. Reducing the occupation of foreign exchange will affect the confidence of China's domestic capital market, especially the stability of the financial market represented by the stock market. However, the amount of foreign exchange has not decreased much and the speed is not fast, which has little impact on China's economy.

After the foreign currency enters, it needs to be converted into RMB before it can be used because it is not in circulation. For example, 7 yuan 1 is the foreign exchange account. Regardless of exchange rate changes, the decline in foreign exchange holdings means that the funds in the market are reduced and the money is tight-in layman's terms, the money is not enough. Foreign exchange account refers to the domestic currency invested by the central bank for purchasing foreign exchange assets such as US dollars. Since RMB is not a freely convertible currency, foreign trade enterprises and residents need to convert foreign exchange into RMB before circulation. In the past, influenced by the compulsory settlement system and the inflow of hot money, China's foreign exchange holdings have been increasing. With the strengthening of the US dollar, SAFE's willingness to settle foreign exchange has increased, and its foreign exchange holdings have gradually declined. Foreign exchange is often regarded as the main channel to provide liquidity to the market. If it increases, it means injecting liquidity, if it decreases, the opposite is true.