If the central bank sells foreign currency to recover RMB through foreign exchange transactions in China, it will reduce foreign exchange reserves, depress the foreign exchange rate and support the RMB exchange rate. Generally, when there is a large outflow of market funds and the RMB exchange rate is expected to depreciate sharply, the central bank will adopt the above method.

If the central bank does not purchase domestic assets through foreign exchange reserves, it will not lead to a decrease in foreign exchange reserves.