Abstract: By the end of 2003, China's foreign exchange reserve has reached to more than 400 billion US dollors, which appears to be excessive in conventional perspective. However, for China, a developing country in an opening economic environment,the foreign exchange reserve will unavoidably be influenced by many other factors. Therefore, a conclusion can be drawn that China's current foreign exchange reserve is not over-abundant and it is essential that an absolutely sufficient amount of foreign currency should be reserved in China Although keeping the present amout of foreign exchange reserve may bring about certain opportunity cost, yet it is actually much less comparing with the price we will have to pay when foreign and domestic economies lose their balance and hence we are forced to rearrange the economy after possible external impacts resulted from the inadequacy of foreign exchange reserve.