China's PBOC cuts foreign exchange reserve requirement ratio for banks

07 Sep '22

1 min read

The People's Bank of China. Pic: Shutterstock/ testing

The People's Bank of China (PBOC), the nation's central bank, has stated that it will decrease the foreign exchange reserve requirement ratio for banks from 8 per cent to 6 per cent on September 15, 2022. The announcement led to the strengthening of the onshore and offshore exchange rates of the renminbi against the dollar.

PBOC’s decision came after the renminbi's exchange rate reached 6.94, which is a two-year low, against the dollar recently, according to Chinese media reports.

“The country is capable of keeping the renminbi generally stable. China has seen controllable spill-over effects from US tightening, thanks to the country's stable fundamentals and a new upward trend seen in economic activity. The renminbi has risen against major nondollar currencies this year,” said PBOC deputy governor Liu Guoqiang at a press conference.

The move is anticipated to stabilise the renminbi by raising dollar liquidity in the foreign exchange market as well as showing that the authorities are prepared and capable of giving considerable support to the Chinese currency and economy.

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