excessive Foreign reserve and currency appreciation

Hi all, I’m a newcomer to this forum. Nice to meet you all. I have recently read an article about record-high level of China’s foreign reserve. http://www.economist.com/agenda/displaystory.cfm?story_id=11526752 I have some questions after reading it. As stated in the article, there’s significant level of China’s foreign reserve (USD 1.76 trillion). Chinese government need to find a way to reduce the level. Then I have a question about it. Why do they need to reduce the level? As long as the reserve does not seep into the market to increase the money supply, it won’t affect the market, is it right? Can’t they just keep the money and use when there’s need? Another question is that I don’t have a concrete idea how the impact of currency appreciation on the market? I will try to seek for answer on internet but I hope anyone can give me some guides. Many Thanks :slight_smile: