FX.co ★ PBoC to Raise FX Reserve Requirement to 6%

The People’s Bank of China will raise the foreign exchange reserve requirement ratio (RRR) for financial institutions by 2 percentage points—from 4% to 6%—effective November 15, in a move aimed at tightening dollar liquidity and slowing the yuan’s recent appreciation. The adjustment is expected to withdraw roughly USD 24 billion from the financial system. This step reverses the central bank’s September 2023 decision to lower the ratio, which had been intended to curb yuan depreciation and stem capital outflows. The yuan has appreciated more than 5% against the U.S. dollar so far this year, supported by resilient exports and increased corporate foreign-currency conversion; however, further gains could erode the competitiveness of Chinese exports.