The view is that China's excessive surplus and compulsory foreign exchange settlement policy are one of the main reasons leading to inflation.

Compulsory foreign exchange settlement and sale system:

It means that in addition to the foreign exchange accounts stipulated by the state, enterprises and individuals must sell surplus foreign exchange to designated foreign exchange banks, which must sell foreign exchange higher than the positions of the State Administration of Foreign Exchange in the interbank market. In this system, the central bank is the largest recipient of the interbank market, thus forming the country's foreign exchange reserves.

That is, you said, "for every dollar that comes in, the central bank will make a considerable purchase of RMB."

But things are different now.

In August this year, the State Council issued the revised Regulations on Foreign Exchange Control in People's Republic of China (PRC). The new "Regulations" cancel the requirement of compulsory settlement of foreign exchange income in current account of enterprises, which helps to reduce the pressure on the country's foreign exchange reserves.

The original "Regulations" stipulated that the current account foreign exchange income of domestic institutions should be sold to designated foreign exchange banks, or foreign exchange accounts should be opened with the approval of designated foreign exchange banks. The new Regulations cancel this mandatory requirement, and domestic institutions can retain foreign exchange income.

In other words, there is no need for the central bank to do so now.