China's central bank to raise foreign-exchange reserve ratio to 6% from 15 November to slow the yuan's rapid gains
The People's Bank of China said on Tuesday it will raise the foreign-exchange deposit reserve requirement ratio for financial institutions by two percentage points to 6% from 4%, effective 15 November, a move aimed at tightening dollar liquidity and slowing the yuan's gains. Figures checked on Tuesday morning, 3 November 2026 (Pakistan time).
China's central bank said on Tuesday it will raise the amount of foreign currency that financial institutions must hold as reserves, a move aimed at tightening dollar liquidity conditions and slowing the pace of recent gains in the yuan.
The People's Bank of China (PBOC) said it would raise the foreign-exchange reserve requirement ratio by two percentage points to 6% from 4%, effective on 15 November, according to an online statement.
The decision is aimed at strengthening the management of foreign-exchange liquidity in financial institutions, the central bank said, in the latest step by Beijing to manage the currency's path after a strong run this year.
The adjustment would result in an extra US$24 billion being withdrawn from the financial system, according to a Reuters calculation based on official foreign-exchange deposit data, reducing the supply of dollars available for lending and trading.
The yuan has gained more than 5% against the dollar so far this year, making it one of the best-performing Asian currencies. That strength has helped importers and eased imported inflation, but it can also weigh on exporters by making Chinese goods more expensive abroad.
The move marks a reversal of the PBOC's decision in September 2023 to lower the foreign-exchange reserve requirement ratio, a step taken then to stem the yuan's rapid losses and capital outflows. The shift in direction underlines how far sentiment towards the currency has changed in the intervening period.
The announcement comes a day after the central bank stepped up separate support for the stock market, including a 100-billion-yuan swap operation on Tuesday for securities, fund and insurance companies, after the CSI300 index suffered its worst October since early 2016. The two measures pull in different directions in different markets: one steadies equities, the other cools currency strength.
For banks, a higher reserve ratio means a larger share of foreign-currency deposits must be parked at the central bank rather than lent out, tightening dollar liquidity in the onshore system. Analysts watch the tool closely because Beijing uses it sparingly, as a signal that it sees a currency move as too fast in either direction.
Market reaction will be watched in the coming sessions, particularly whether the yuan's advance pauses without unsettling the broader recovery in Chinese assets. Traders will also look for any further guidance from the PBOC on whether it views the current level of the currency as comfortable or still moving too quickly.
The ratio change takes effect on 15 November, giving banks time to adjust their positions. Until then, attention turns to the central bank's daily reference rate for the yuan and to trading in offshore markets, which often give the earliest signal of how the policy shift is being received.
This post is market news information only, not financial advice.
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