China’s central bank moves against yuan appreciation

People’s Bank of China raises the ratio by 2 percentage points to tighten foreign currency liquidity

The People’s Bank of China announced on Wednesday that it will raise the foreign exchange reserve requirement ratio for financial institutions from 4% to 6% in order to temper the yuan’s appreciation.

According to the central bank’s official statement, the 2-percentage-point increase will take effect on November 15.

The macroprudential measure is aimed primarily at tightening foreign currency liquidity, mainly in US dollars, and easing upward pressure on the national currency. The FX reserve requirement ratio indicates the share of foreign currency deposits that financial institutions are required to hold with the central bank.

In the first nine months of 2026, the yuan strengthened 4.2% against the US dollar. The trend continued in October, with the yuan appreciating for 14 consecutive days in offshore trading starting October 14.

The decision marks the first time the central bank has raised this ratio since 2021. In 2021, the ratio was increased in two stages to 9%. It was then cut three times in 2022 and 2023 to the current level of 4%.