Deposit 20% with the People's Bank of China for Forward Exchange Transactions

[Asia Economy Senior Reporter Cho Young-shin] The People's Bank of China, the central bank of China, announced on the 26th that it will raise the foreign exchange risk reserve ratio from the current 0% to 20% starting from the 28th.

[Image source=Yonhap News]

[Image source=Yonhap News]

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The increase in the foreign exchange risk reserve ratio appears to be a response to the yuan-dollar exchange rate surpassing 7 yuan per dollar.


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The foreign exchange risk reserve ratio refers to the proportion of funds that financial institutions must deposit with the People's Bank of China for one year when engaging in forward exchange transactions. China first introduced this system in 2015 but abolished it in 2017. The increase in the foreign exchange risk reserve ratio is a measure to prevent the depreciation of the yuan.


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