The People’s Bank of China announced on November 3 that it would raise the reserve requirement ratio on foreign currency deposits from 4% to 6%, effective November 15, 2026. With about $1.2 trillion in foreign currency deposits, the measure is expected to lock up an additional $24 billion in the Chinese banking system. The central bank aims to reduce foreign currency liquidity and ease appreciation pressure on the yuan without changing its policy rates or selling its official foreign exchange reserves. This policy is separate from the development of the digital yuan, the mBridge project and Hong Kong’s licensing regime for stablecoins. Its effect on the exchange rate will continue to depend on trade flows, corporate currency conversions and international conditions.
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