Foreign exchange reserve, also known as forward foreign exchange purchase risk reserve, means that every time a customer makes a forward foreign exchange sale business, it is necessary to deposit 20% of the funds of this business in the central bank. The central bank freezes this fund in order to increase the bank's capital as a risk reserve for possible losses in the future, so foreign exchange reserves are also called foreign exchange risk reserves.

Why should we raise the foreign exchange reserve ratio?

Because the appreciation of RMB will reduce the competitiveness of export enterprises, the same goods will become more expensive abroad, which will naturally affect sales. Raising the foreign exchange reserve ratio means that commercial banks need to pay more foreign exchange. If banks don't have so many, they must use RMB to buy foreign exchange from the market, resulting in less foreign exchange in the market, and more RMB, naturally the RMB will depreciate.