There are short-term government deposits and other means of payment that can be cashed abroad, such as foreign securities, checks, promissory notes and foreign currency drafts of foreign banks. For a long time after World War II, the main currency of foreign exchange reserves in western countries was the US dollar, followed by the British pound. After 1970, German mark, Japanese yen, Swiss franc and French franc were added.
Composition of China's foreign exchange reserves: China's foreign exchange reserves are mainly composed of four parts: first, a huge trade surplus; Second, the net inflow of foreign direct investment has increased significantly; Third, the continuous increase of foreign loans; The fourth is the inflow of "hot money" caused by the expectation of RMB appreciation (estimated to have exceeded $50 billion in early 2008 and $654.38+000 billion in early 2009).
Foreign exchange reserve refers to the foreign exchange assets held by the central bank and other government agencies to meet the needs of international payment. Foreign exchange reserves are assets held by the national monetary authorities and can be converted into foreign currencies at any time. The specific forms of foreign exchange reserves include: short-term overseas government deposits or other payment methods that can be cashed overseas, such as foreign securities, foreign bank checks, promissory notes, foreign currency drafts, etc. Balance of payments deficit and intervention in foreign exchange market to maintain local currency exchange rate.
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.