China's central bank raises forex reserve requirement ratio to 6% amid yuan's gains; move could help curb excessive market swing: expert - Global Times

China's central bank has raised the foreign exchange reserve requirement ratio to 6%, a move reported by the Global Times as the yuan has strengthened. The ratio refers to the share of foreign currency deposits that financial institutions must hold in reserve, so lifting it reduces the volume of foreign currency that banks can deploy. The reported aim is to help curb excessive market swings, according to an expert cited in the coverage.

The change is best read as a macroprudential adjustment rather than a signal about the direction of policy more broadly. By adjusting reserve requirements on foreign currency deposits, authorities can influence the pace of conversion and lending activity without directly intervening in the exchange rate itself. That makes it a relatively targeted tool for smoothing volatility.

For markets, the key takeaway is that officials are paying close attention to the speed of currency moves. What to watch next: the pace of the yuan's appreciation, whether the measure meaningfully slows foreign currency conversion, and whether further adjustments follow if volatility persists.