(a) China's international reputation has been enhanced.

The continuous growth of foreign exchange reserves has improved the shortage of foreign exchange supply in China, enhanced the ability of external payment, improved China's comprehensive national strength, and enhanced the confidence of all sectors of society in the national macroeconomic policy. Foreign exchange reserve is an important indicator of a country's comprehensive national strength. The sustained growth of China's foreign exchange reserves marks the continuous enhancement of China's ability to pay and adjust the international balance of payments, provides a reliable guarantee for China to borrow foreign debts and repay the principal and interest of debts, and lays a solid foundation for maintaining China's good international reputation, attracting foreign investment and striving for international competitive advantages.

(2) It is conducive to the effective intervention of the central bank in the foreign exchange market.

A country's foreign exchange reserves show its ability to intervene in the foreign exchange market and maintain the exchange rate of its local currency. Central banks of various countries can influence the relationship between foreign exchange supply and demand by selling or buying foreign exchange and local currency in the foreign exchange market, so as to achieve the purpose of regulating the foreign exchange market and stabilizing the exchange rate. The funds needed to intervene in the foreign exchange market are characterized by uncertain time and huge amount. Therefore, sufficient foreign exchange reserves can ensure that China can cope with sudden financial risks calmly and meet the requirements of effectively intervening in the foreign exchange market and maintaining the exchange rate of its local currency.

(3) It has created conditions for the ultimate convertibility of RMB.

RMB convertibility is an important goal of China's foreign exchange system reform. At the end of 1996, China realized the free convertibility of RMB in the current account, and abundant foreign exchange reserves ensured that China could meet the exchange demand that may occur at any time, maintain the relative stability of the exchange rate in the foreign exchange market, resist the risks brought by currency exchange and weaken its possible negative impact. Adequate foreign exchange reserves enable the central bank to effectively regulate the foreign exchange market and maintain the basic balance of international payments, thus maintaining the basic stability of the RMB exchange rate in the process of moving towards free convertibility.

(D) Attracted a large number of foreign capital inflows

Foreign direct investment has always been one of the main driving forces of China's economic development. On the one hand, the stable political and economic environment, good investment opportunities, low labor costs and huge market potential attract international industries to China.