Funds outstanding for foreign exchange refer to the domestic currency released by the central bank when it purchases foreign exchange assets.
Since it is a non-convertible currency, after the introduction of foreign capital, it needs to be converted into RMB before it can be used for circulation.
The country needs to invest a lot of money in exchange for foreign capital, and the country needs to buy foreign exchange with its own currency.
Therefore, the “money supply” is increased, thus forming foreign exchange funds.
The specific relationship chain of funds occupied in foreign exchange is as follows: an increase in net assets abroad, an increase in funds occupied in foreign exchange, an increase in base currency.
Along with the increase of bank deposits in China, the role of loan is gradually reduced, at the same time, the importance of foreign exchange fund is also rising with respect to other ways of monetary investment, which include adjusting deposit reserve, opening market operation of money market, and so on.
