The People’s Bank of China will raise the foreign exchange reserve requirement ratio (RRR) for financial institutions by 2 percentage points, to 6% from 4%, effective November 15, to tighten dollar liquidity and slow the yuan’s recent appreciation. The adjustment is expected to withdraw around USD 24 billion from the financial system. The move reverses the central bank’s September 2023 decision to lower the ratio to curb the yuan’s depreciation and capital outflows. The yuan has gained more than 5% against the U.S. dollar this year, supported by resilient exports and corporate currency conversions, but further appreciation could undermine export competitiveness.
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