We have all heard of licorice, but what it is used FOR, is a bit of a mystery. Licorice is used in nearly every Chinese herbal formula (and there are thousands) because it is known to “harmonize the formula”.
Well, what the heck does that mean? Because licorice root can ameliorate the blood (make it better by kick starting your blood and energy), it facilitates the gastrointestinal tract's absorption process of the herbs in the formula. Researchers have been studying this process for years, and although scientists do not completely understand the “how” of why licorice does what it does, it is known that it does work.
Licorice root “harmonizes” herbal formulas by helping your GI tract. Licorice (Glycyrrhiza glabra) root has been used to treat stomach ulcers, it has antioxidant qualities (the root contains flavonoids), contains amino acids that help build healthy cells and muscles, and treats upper respiratory infections, viral infections and a sore throat. Amazingly, it is classified as an adaptogen, and helps the body deal with stress! What a versatile chinese herb!
It is important to know that it's better to use the whole herb rather than chemicals isolated from the herb because all the components of the herb together produce the desired effect. Once again, we get back to "harmony".
You can read more about how the Chinese herb, licorice root, in these articles:
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References:  Effect of licorice on the reduction of body fat mass in healthy subjects. Armanini D, De Palo CB, Mattarello MJ, Spinella P, Zaccaria M, Ermolao A, Palermo M, Fiore C, Sartorato P, Francini-Pesenti F, Karbowiak I. J Endocrinol Invest. 2003 Jul;26(7):646-50.  Glycyrrhetinic acid, the active principle of licorice, can reduce the thickness of subcutaneous thigh fat through topical application. Armanini D, Nacamulli D, Francini-Pesenti F, Battagin G, Ragazzi E, Fiore C. Steroids. 2005 Jul;70(8):538-42. Epub 2005 Apr 12.  The treatment of atopic dermatitis with licorice gel. Saeedi M, Morteza-Semnani K, Ghoreishi MR. J Dermatolog Treat. 2003 Sep;14(3):153-7.  The efficacy of licorice root extract in decreasing transaminase activities in non-alcoholic fatty liver disease: a randomized controlled clinical trial. Hajiaghamohammadi AA, Ziaee A, Samimi R. Phytother Res. 2012 Sep;26(9):1381-4. doi: 10.1002/ptr.3728. Epub 2012 Feb 6. Other Sources: Encyclopedia of Dietary Supplements, second edition, ed, Paul M. Coates, 2005, Marcel Dekker, New York, pp. 479 – 486.