China's foreign exchange reserves surpass Japan's, ranking first in the world, which shows that China has surpassed Japan's strength in a certain respect, which is extremely powerful for China people to enhance their self-esteem and stop worshipping foreign things.
Foreign exchange reserves have three functions.
The first function of foreign exchange reserves is to enable a country to cope with the fluctuation of foreign exchange demand in foreign trade. At this point, the International Monetary Fund (IMF) still follows the triffin Rules, which they have regarded as the standard for more than 60 years. Rob terry Fen, a Belgian-born economics professor at Yale University with a strong French complex, was quite dissatisfied with the rampage of the US dollar in international settlement at the end of World War II. He believes that in order to ensure the foreign exchange demand in import and export, a country should maintain foreign exchange reserves equivalent to the total import volume of 3-4 months, so that the country will not have a big foreign exchange shortage in import and export. China's current foreign exchange reserves have obviously far exceeded the level of triffin's Law.
The second function of foreign exchange reserves is to ensure the foreign exchange demand for repaying foreign debts. Specifically, the country's foreign exchange reserves should be able to meet the foreign exchange demand generated by short-term foreign debts due, and creditors will not extend them.
The third function of foreign exchange reserves in traditional thinking is that foreign exchange reserves should be sufficient to resist the foreign exchange demand brought by short-term capital flows (including speculative capital flows). Because China's capital account is not open, theoretically speaking, international short-term speculators cannot use the cross-border flow of capital to attack the RMB. In the short term, our reserves are sufficient to meet this demand.
A little more than the above traditional thinking, foreign exchange reserves should not only ensure the stability of the exchange rate, but also ensure the stability of the macro economy.
As for 1 euro, it can be converted into 10 RMB, which is caused by historical reasons and is also in line with the actual situation in China. With the continuous growth of China's economy, it is expected that RMB 1 will be converted into Euro 1 in a few years.