The People's Bank of China will increase the foreign currency deposit reserve requirement ratio from 4% to 6% starting November 15, 2026, to manage liquidity.
The People's Bank of China (PBC) announced on Tuesday, November 3, 2026, that it will raise the reserve requirement ratio for foreign currency deposits of financial institutions by 2 percentage points. The ratio will increase from the current 4% to 6%, effective November 15, 2026.
According to a statement from the People's Bank of China, the decision is intended "to strengthen the management of foreign currency liquidity of financial institutions."
Market analysts have noted that this adjustment is expected to tighten the supply of US dollars in the banking system. Marco Sun, chief financial markets analyst for China at MUFG Bank (MUFG), said the PBC is responding to strong market-driven yuan appreciation. "By absorbing part of the US dollar liquidity in the banking system, it weakens the momentum of yuan appreciation and prevents overly elevated market expectations of one-way currency moves," Sun said.
A Reuters calculation based on official FX deposit statistics suggests the adjustment will absorb approximately $24 billion in funds from the financial system.
The move follows a period of significant yuan appreciation. The currency has gained approximately 5 percent against the US dollar this year, according to Reuters, and reached a more than four-year high in October, according to Investing.com.
Xi Junyang, a professor at the Shanghai University of Finance and Economics, told the Global Times that the adjustment reflects a need to "ease recent appreciation pressure on the yuan and guard against excessive exchange-rate movements." He noted that "a rapidly strengthening yuan could affect exporters, while large fluctuations in either direction could introduce instability into economic activity."
Xi Junyang attributed the yuan's strength to several factors, including export growth, foreign investment inflows, and movements in the US dollar.
This decision marks a reversal of a September 2023 decision, when the PBC lowered the foreign exchange reserve requirement ratio from 6 percent to 4 percent to improve the ability of financial institutions to use foreign-currency funds. The ratio had previously reached 9 percent in 2021.
In an October 8 statement, the PBC noted that exchange rates are shaped by multiple factors, including economic growth, monetary policy, financial markets, geopolitical developments, and unexpected risks. The central bank stated that it neither targets a specific exchange-rate level nor intervenes in long-term currency trends, but maintains a managed floating exchange-rate system based on market supply and demand.
Sources
This article was drafted with AI assistance and checked against the sources above. Company claims are reported as claims. Cover image is AI-generated.
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The People's Bank of China will increase the foreign currency reserve requirement for financial institutions to 6% starting November 15 to manage liquidity.
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