China holds so many foreign exchange reserves because we want to keep the price of RMB down, so we have to keep selling RMB and buying US dollars to keep the price down, so the country has a lot of US dollars.

However, because the RMB is undervalued, there is appreciation pressure on the RMB against the US dollar. Once the renminbi appreciates, it is beneficial to those who hold renminbi and unfavorable to those who hold dollars. At this time, China holds a large amount of dollars, which is unfavorable.

Or you can understand it this way, you have 1 billion dollars. If the RMB rises from 8 to 7, as you said, your 1 billion dollars has not changed, and it seems that there is no loss. But if you change this 1 billion dollars into 800 million yuan first, and then change it back seven years later, you will have about1.1.40 billion dollars, and the difference of (0. 1.4) million dollars is your loss.