TREE NEWS update: The People’s Bank of China raised the foreign-exchange deposit reserve ratio for financial institutions on Nov. 3, tightening dollar liquidity onshore to ease pressure from a strengthening yuan. Wen Bin of China Minsheng Bank called the move an open and transparent market-based measure. The PBOC last raised the ratio twice in 2021 to 9%, then cut it three times between 2022 and 2023 to the current 4%.
China’s PBOC Raises FX Deposit Reserve Ratio to Curb Yuan Strength
The PBOC is reaching for a familiar, technical lever rather than direct intervention, which signals a preference for letting the yuan trade while still capping its upside. The tool's history cuts both ways: the same ratio was raised in 2021 to lean against strength and then cut repeatedly as conditions reversed, so its use here reads as a cyclical adjustment, not a change in FX policy direction. The immediate effect is to tighten onshore dollar liquidity, which affects banks and importers most directly. Whether the yuan's appreciation pressure eases, and whether further reserve-ratio moves follow, is the open question.
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