Abstract: In the light of the data of China's foreign exchange reserve in the pe riod from 1994 to 2004, this article analyzes the growth process of China's fore ign exchange reserve.It is found that China's foreign exchange reserve features a phased growth and the growth process can be divided into three different stag es. In view of the current situation of China's foreign exchange reserve and dra wing on the relevant theories of international finance, the article explores the rationale for the phased growth of China's foreign exchange reserve and points out that the balance between current account and finance account is the direct c ause leading to the phased growth of China's foreign exchange reserve while the factors which affect the balance between the two accounts are markedly different .