The functions of foreign exchange reserves mainly include the following four aspects: 1. Adjusting the balance of international payments and ensuring external payments. When there is a deficit in the international balance of payments, reserves can be used to make up for it. Although this is only a temporary measure, it can buy time to prepare other regulatory measures. This function of reserves is known as the "buffer" of the balance of payments. 2. Intervene in the foreign exchange market to stabilize the local currency exchange rate. When the supply of foreign exchange exceeds demand in the foreign exchange market, a country's monetary authorities purchase foreign exchange in the foreign exchange market to prevent the excessive rise in the local currency exchange rate. When the supply of foreign exchange exceeds demand in the foreign exchange market, foreign exchange can be sold to prevent excessive decline in the local currency exchange rate. Foreign exchange reserves are an important means for a country's government to intervene in the foreign exchange market and stabilize the currency exchange rate. 3. Maintain national credibility and improve external financing capabilities. Frequent international capital flows are a major feature of today's world. Whether funds flow into a country often depends on investors' assessment of the country's creditworthiness. The degree of sufficient foreign exchange reserves is an important assessment indicator. If the borrowing country has abundant foreign exchange reserves, it indicates that the country has good solvency. When financing in the international market, it can obtain various types of loans more easily or even at a lower cost. When foreign investors invest in the country, their profits will be higher. There is a sense of security in repatriation and a willingness to actively inject capital. 4. Enhance comprehensive national strength and ability to resist risks. Internationally, foreign exchange reserves are usually used as an important indicator when evaluating a country's comprehensive national strength. The increase in foreign exchange reserves also means the enhancement of a country's external solvency and comprehensive national strength. At the same time, in the process of economic, political and social development, uncertain factors and various risks will arise. Maintaining a certain amount of foreign exchange reserves is very necessary to cope with various risks and emergencies. Foreign exchange management, also known as foreign exchange control, refers to the restrictive policies implemented by a country's government to authorize the national monetary management authority or other government agencies to implement foreign exchange receipts and payments, sales, lending, transfers, international settlements, foreign exchange rates, and foreign exchange markets. measure. Generally speaking, most countries that implement foreign exchange management stipulate that the central bank is the foreign exchange management agency. This is mainly because the outflow or inflow of foreign exchange will directly or indirectly affect the domestic currency circulation. In some countries, the Ministry of Finance is responsible for foreign exchange management, or the Ministry of Finance and the central bank are jointly responsible. A few countries have established specialized foreign exchange management agencies. In our country, the State Administration of Foreign Exchange is a national bureau under the leadership of the People's Bank of China. From the perspective of management objects, foreign exchange management can usually be divided into management of people and management of objects. Management of people includes management of legal persons and natural persons. According to the nationality, residence or business area of ??natural persons and legal persons, they can be divided into residents and non-residents. Generally speaking, countries that implement foreign exchange management implement different foreign exchange management policies for residents and non-residents. The management of objects refers to the management of foreign exchange and foreign exchange valuables, including foreign banknotes, foreign coins, payment instruments (such as money orders, promissory notes, cheques, travellers' checks, travel letters of credit, etc.), securities (such as stocks) , bonds, life insurance policies, etc.) and gold. Some countries also include silver, diamonds, etc. From the perspective of balance of payments management and adjustment, foreign exchange management can be roughly divided into current account foreign exchange management, capital account foreign exchange management and exchange rate management. Before the reform and opening up, due to the shortage of foreign exchange resources, my country had long implemented a highly centralized foreign exchange management system. Since the reform and opening up, my country has reformed its foreign exchange management system, gradually reduced administrative intervention, and introduced market adjustment mechanisms. In particular, in 1994, the exchange rate was unified and a single, managed floating exchange rate system based on market supply and demand was implemented to achieve conditional convertibility of the RMB under the current account. In 1996, Article 8 of the Agreement of the International Monetary Fund was accepted and realized The RMB is fully convertible under the current account. After joining the World Trade Organization, our country will accelerate its integration into the process of economic and financial globalization, and the relationship between foreign exchange knowledge and foreign exchange management policies will become increasingly close to people's daily lives. Nowadays, various parties are very concerned about why the RMB exchange rate can remain basically stable, whether the RMB exchange rate is allowed to float freely, why exchange controls are still implemented on the capital account after the current account convertibility, and the conditions and steps for the convertibility of the RMB capital account. This chapter will not only introduce the knowledge about foreign exchange management, but also analyze these issues based on China's national conditions and international experience. 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