The concept of foreign exchange has a double meaning, that is, there are dynamic and static points.
The static concept of foreign exchange is divided into a narrow foreign exchange concept and a broad foreign exchange concept.
In a narrow sense, foreign exchange refers to various payment methods expressed in foreign currencies, generally accepted by all countries, and used for international settlement of claims and debts. It must have three characteristics: payability (assets that must be expressed in foreign currency), availability (must be a claim that can be compensated abroad), and convertibility (must be a foreign currency that is freely convertible into other means of payment) assets).
In a broad sense, foreign exchange refers to all assets owned by a country that are denominated in foreign currencies. The International Monetary Fund (IMF) defines it as: “Foreign exchange is the monetary administration (central bank, currency management agency, foreign exchange stabilization fund and the Ministry of Finance) in the form of bank deposits, Treasury bills, long-term and short-term government securities, etc. The creditor’s rights that are held and can be used when the balance of payments is in deficit.” The “Regulations on Foreign Exchange Administration” amended and promulgated by China in 1997 stipulates: “Foreign exchange refers to the following means of payment and assets in foreign currencies that can be used for international settlement:
( 1) Foreign currency, including coins, banknotes, etc.;
(2) Foreign currency payment certificates, including bills, bank deposit certificates, postal savings certificates, etc.;
(3) Foreign currency securities, including government bonds, treasury bills, corporate bonds, stocks , interest
(4) Special Drawing Rights, European Currency Units;
(5) Other foreign exchange assets.”
The dynamic concept of foreign exchange refers to the flow of currency between countries and the conversion of the currency of one country into the currency of another country , a specialized business activity to pay off international creditor’s rights and debts. It is the abbreviation of International Exchange (ForeignExchange).