Foreign exchange control is a policy instrument used by the government or central bank of a country or region to interfere or control the foreign exchange market. This control may include setting exchange rate levels, setting restrictions on foreign exchange trading and holdings, and restrictions on capital flows.

The main objective of foreign exchange controls is usually to protect the domestic economy and maintain the stability of exchange rates. These controls may be aimed at individuals, companies or financial institutions’ foreign exchange trading behavior, as well as transnational capital flows. For example, governments may limit the number of foreign currencies their citizens buy, or set restrictions on foreign investors entering domestic markets to prevent large-scale money flows or outflows from causing economic turmoil.

In foreign trade transactions, foreign exchange controls mainly refer to measures that governments impose restrictions and regulations on the transactions of domestic currencies with foreign currencies as well as transnational capital flows. These regulations may affect the ability and way companies and individuals conduct international transactions.

Basic methods of foreign exchange control:

1. Export foreign exchange income control
2. Foreign exchange controls
3. Non-trade foreign exchange controls
4. Controls on foreign exchange capital imports
5. Export of foreign exchange controls
6. Gold and cash import and export controls
7. Implementation of the exchange rate system

Role of Foreign Exchange Control:

1. The implementation of foreign exchange controls can greatly limit capital leakage and reduce excessive loss of foreign exchange resources.
2. The stabilization of exchange rates can play a positive role in preventing large volatility and vicious competition in the domestic market.
3. It will be able to keep the currency in the unified market within the country, free from speculation, and safeguard the stability of the domestic economy.
4. Facilitate national governments to implement differential treatment policies related to trade, thereby adjusting and optimizing the trade structure.
5. The national industry of the country shall be protected and the domestic industry shall not be suppressed or expelled by foreign investment.
6. It plays a positive role in the livelihood of the people and ensures the standard of living of the people.
7. It is able to increase the value of the fiat currency and keep the prices at a relatively stable level,ining the level of national purchasing power and consumption.