On November 3, the People's Bank of China released news that in order to strengthen the foreign exchange liquidity management of financial institutions, the People's Bank of China decided to increase the foreign exchange reserve ratio of financial institutions by 2 percentage points starting November 15, 2026, that is, the foreign exchange deposit reserve ratio from the current 4% to 6%. Lian Ping, chairman of the China Chief Economist Forum and director of the International Finance Research Institute, said that the increase in the foreign exchange reserve ratio is a macroprudential adjustment made by the central bank on unilateral exchange rate fluctuations and foreign exchange liquidity in the current context of strong RMB and abundant foreign exchange supply. The purpose is to avoid expectations of rapid unilateral appreciation, enhance market flexibility, and raise institutional risk awareness. The purpose is to forwardly guide financial institutions, exporters, and individuals to rationally treat exchange rate risks and enhance their awareness of the application of foreign exchange risk hedging tools such as hedging. “Raising the foreign exchange reserve ratio is an open and transparent market-based measure. This adjustment sends a policy signal to the market that the central bank stabilizes market expectations and keeps the RMB exchange rate basically stable at a reasonable equilibrium level.” Industry experts said.

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