Foreign exchange reserves refer to convertible foreign currencies held by a country's monetary authorities that can be used for external payment. Not all national currencies can be used as international reserve assets. Only those currencies that occupy an important position in the international monetary system and can be freely converted into other reserve assets can be used as international reserve assets. China and other countries in the world often use foreign exchange reserves in foreign trade and international settlement, mainly including US dollars, euros, Japanese yen, British pounds and so on.

A certain foreign exchange reserve is an important means for a country to adjust its economy and achieve internal and external balance. When the balance of payments is in deficit, the use of foreign exchange reserves can promote the balance of payments; When the domestic macro-economy is unbalanced and the total demand exceeds the total supply, foreign exchange can be used to organize imports, thus adjusting the relationship between total supply and total demand and promoting macroeconomic balance. At the same time, when the exchange rate fluctuates, foreign exchange reserves can be used to intervene in the exchange rate to stabilize the exchange rate. Therefore, foreign exchange reserves are an indispensable means to achieve economic balance and stability, especially when economic globalization is developing and one country's economy is more susceptible to the influence of other countries' economies.