Because China implements the foreign exchange settlement system, when foreign currency is converted into RMB, the People's Bank of China must issue new RMB, resulting in foreign exchange occupation. With the increase of foreign exchange, the base currency will increase, and the money supply will increase even more under the action of the money multiplier. Money has increased, which has caused inflation.

The converted RMB is indeed saved, but with the increase of bank deposits, banks can issue more loans, so the market funds will increase.