[nine_zeros]

Foreign currency is assets in central bank balance sheet. Their own currency is liability.

When an exporter in China gets foreign currency for their export, it goes to the exporters bank. The exporters bank "sells" the foreign currency to the central bank. In this sale, the central bank usually "prints" the yuan to exchange for the foreign currency.

When a trader in China imports goods, it asks their bank for foreign currency. They give the bank yuan. The bank sells the yuan for the foreign currency with the central bank. The central bank sells it's foreign currency assets and "extinguishers" the yuan they received.

It's not as simple as this but this is the theory.