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An essay is presented which offers an analysis on the foreign exchange reserves of China which stood at 2.9982 trillion U.S. dollars at the end of January 2017. Topics covered include the concern by analysts that the reserves have breached the 3 trillion U.S. dollars psychological threshold, the possible reasons behind the falling reserves, and the amount of reserves that China would consider to be appropriate.

The article focuses on the rise in the reserve requirement ratio in China. On June 7, 2008, the People's Bank of China announced to raise the reserve requirement ratio to 17.5%, which is the fifth hike for this year in an effort to control the cash circulation. The increase in reserve ratio has a negative effect to the bank's profit and puts pressure on real estate companies. Shanghai Composite Index dropped to 7.73% on the first day of announcement, which is the biggest drop in 16 months, and followed by another 1.57% on the next day.