The foreign exchange stabilization fund system first started in Britain 1932. Its basic content is that the government allocates a certain amount of local currency and foreign currency funds to set up a foreign exchange stabilization fund account, foreign exchange reserves are included in the account management, and all foreign exchange market intervention funds are used to stabilize the fund account. The foreign exchange stabilization fund account is controlled by the Ministry of Finance, and the central bank only manages the account as an agent. In China, it is not important for the central bank or the Ministry of Finance to dominate the foreign exchange stabilization fund account. The key is to separate strategic decision makers from strategic executors. Foreign exchange intervention through the foreign exchange stabilization fund will not affect the central bank's balance sheet, but can effectively cut off the direct connection between the increase of foreign exchange reserves and the central bank's base money supply, and ensure the independence and continuity of the central bank's monetary policy. We can consider learning from Japan's experience, issuing special treasury bonds or special bills similar to FBs for the purchase of foreign exchange for the stabilization fund, and legally defining them as cash management vouchers to adjust the surplus and deficiency of funds, and not recording them in government debts. When issuing stabilization fund bonds to raise RMB funds, the stabilization fund account should consider the impact on the money market interest rate and the effect of monetary policy, that is, all its assets and liabilities activities should not hinder the central bank from pursuing the ultimate goal of monetary policy. This seems to be a basic principle that major developed countries must abide by in foreign exchange reserve management and foreign exchange market intervention.

Further reading: How to buy insurance, which is good, and teach you how to avoid these "pits" of insurance.