Foreign exchange reserves, also known as foreign exchange reserves, refer to foreign exchange assets held by central banks and other government agencies to meet the needs of international payment.

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 exchange rate of the domestic currency.

2. The disadvantages of excessive foreign exchange reserves:

In China, the most important foreign exchange reserve is nothing more than foreign trade income, which is the most important. As far as foreign trade is concerned, the more foreign trade income, the more foreign exchange income and foreign exchange reserves. It is reasonable to say that this should be a good thing, which is generally understood, but it should be combined with a national condition of China. In China, residents and enterprises are not allowed to hold foreign exchange for a long time. It seems that the policy has been adjusted recently. But the essence is basically the same as in the past. In this case, it is useless for individuals and enterprises to hold foreign exchange, and there is no place to spend it in China, which is also prohibited by the national policy just mentioned. Enterprises must sell the foreign exchange earned from these foreign trade revenues to the state to form the state's foreign exchange reserves. Enterprises sell foreign exchange to the state, and the state must pay the enterprises, otherwise the enterprises will not work in vain. Where does the RMB paid by the state to enterprises come from? The central bank is printed by the People's Bank of China, that is to say, the country will pay the corresponding RMB to the enterprises for how much foreign exchange they sell to the country, that is, the central bank will print the same amount of money. At this time, a problem arises. The country's monetary policy is originally independent and is determined according to the domestic economic situation. Now, as more and more foreign exchange income becomes the country's foreign exchange reserves, the central bank will also withdraw more and more RMB, which may cause too much RMB in the market. Too much money will cause various commodity prices to rise, cpi will rise, house prices will rise, vegetable prices will rise, garlic will be ruthless, and beans will come as soon as they play. Part of the reason for these phenomena is that there is too much money in circulation, a large part of which is foreign exchange income. Therefore, from this perspective, huge foreign exchange income will cause excessive circulation of RMB and disrupt the domestic economic order, which is mainly caused by the current domestic foreign exchange settlement and sale system;

Foreign investment should also be part of foreign exchange. Foreigners who come to China get US dollars and change them into RMB when they come to China. After these foreigners who invest and travel come to China, their dollars will become RMB, and those dollars will become part of foreign exchange reserves. When foreigners see that China's economy is good, many people want to invest in China, and even many people come to China to speculate on houses and things that can appreciate. Financial stocks and bonds are also part of the investment target. Because the amount of money from these speculations is also very huge, which is equivalent to the central bank's corresponding introduction of so much RMB, so the RMB is more likely to be excessive. Therefore, in recent years, domestic housing prices have risen and the prices of various commodities have risen, and some of them have to be "attributed" to these speculative hot money;

As for the bad side of too much foreign exchange, so much foreign exchange in the country is money. Money needs to be spent and invested, otherwise it will be useless. However, China has accumulated so many foreign exchange reserves that there is no place to spend them in China. If it wants to spend or invest, it can only go outside China. When an enterprise has import demand, such as importing iron ore at home and importing foreign equipment, it has to pay foreign customers US dollars and other foreign exchange, but the enterprise has no foreign exchange. Because the money he recovered from selling things-foreign exchange has been sold to the country, when he needs foreign exchange to buy foreign things now, he has to exchange it with the country and then pay it abroad, so some foreign exchange has returned to the enterprise for import, accounting for only a small part of our foreign exchange, and there is still a lot of foreign exchange balance there. This is the problem. If you want to invest, you must make a profit, but you need to be cautious about risky investments in the market. But that's the problem. We have no place to invest, and there is no project investment with relatively safe returns and good returns. At present, China holds more than US$ 654.38 trillion in US Treasury bonds, but the yield seems to be 2%-3%, which is about this figure. Now there is much domestic inflation, so the investment income is very low; In addition, there are not so many talents in this field in China, so we have seen reports that many projects invested abroad have lost hundreds of millions, billions, tens of billions and several dollars at once. There should be some reports about CICC, Huijin and Blackstone in the United States.

Therefore, based on these, it is good to have enough foreign exchange reserves, and the more the better. After all, you take so many dollars, but the dollar keeps depreciating. Basically everyone is depreciating. In the past few and a half months, the yen has depreciated by about 20%. When everyone is competing to depreciate, the more foreign exchange you hold, the more your wealth will shrink.