Foreign exchange reserve, also known as foreign exchange reserve, refers to the foreign exchange part of the international reserve assets held by a government, that is, the creditor's rights held by a government in foreign currency. It is an asset held by the national monetary authority and can be converted into foreign currency at any time. In a narrow sense, foreign exchange reserves refer to a country's foreign exchange accumulation; Broadly speaking, foreign exchange reserves refer to assets denominated in foreign exchange, including cash, foreign bank deposits and foreign securities. Foreign exchange reserve is an important part of a country's international liquidity, which has an important influence on balancing international payments and stabilizing exchange rate.

The specific forms of foreign exchange reserves include: short-term government deposits abroad or other means of payment that can be cashed abroad, such as foreign securities, checks, promissory notes, foreign currency drafts of foreign banks, etc. It is mainly used to pay off the balance of payments deficit, intervene in the foreign exchange market and maintain the local currency exchange rate.

China's foreign exchange reserve structure is dominated by US dollar assets for the following historical and international financial theoretical reasons:

1. The economic activities of reserve currency issuing countries should focus on the domestic economy. Although the United States accounts for a large proportion in international trade, compared with the huge GDP of the United States, the proportion is still very low, far below the corresponding indicators of Japan, Germany and Switzerland. The main economic activities of the latter three countries are export-oriented, and their currencies are easily disturbed by international capital flows and fluctuate greatly, which is not conducive to maintaining value;

2. Except the United States, the central banks of Japan, Germany and Switzerland refused to let their currencies play a more important role in the international financial market;

3. The US dollar is an international means of payment, a transaction intermediary and a means of value storage formed in history;

4. Two thirds of international trade is settled in US dollars;

5. Most wholesale transactions in the international financial market are conducted in US dollars, and the financial operations of central banks in various countries are mainly in US dollars;

6. The foreign exchange reserves of major countries are mainly US dollar assets;

7. International syndicated loans and most transactions in international bond markets are in US dollars or US dollar bonds.