China Moves to Slow the Yuan's Rally: FX Reserve Rule Jumps to 6%

China's central bank raised its foreign-exchange reserve requirement ratio to 6% from 4% on Tuesday, November 3, 2026, in one of its strongest moves yet to slow the yuan's rally. The People's Bank of China (PBOC) change takes effect on November 15 and, by a Reuters calculation, will pull an extra $24 billion out of the financial system. The onshore yuan weakened as much as 0.37% to 6.6728 per dollar, its weakest level since October 23, and headed for its biggest one-day drop since May 15.

What happened

The PBOC said in a statement on Tuesday that it would raise the foreign exchange reserve requirement ratio — the share of foreign-currency deposits that financial institutions must hold as reserves — by 2 percentage points, to 6% from 4%, effective November 15. The bank said the decision was "aimed at strengthening the management of foreign exchange liquidity in financial institutions." Dow Jones, via Morningstar, reported the same 2-point hike to 6% and the same November 15 start date, confirming the move independently.

Separately, the PBOC lowered its daily midpoint rate for a second day in a row on Tuesday, to 6.7150 per dollar — 661 pips weaker than a Reuters estimate, its largest weak-side deviation since September 10. In offshore trading, the dollar was last up 0.3% at 6.6639 yuan after touching 6.6666, according to Dow Jones.

Why it is blowing up

The yuan has gained more than 5% against the dollar so far this year, reaching its strongest level since 2022 and becoming one of Asia's best-performing currencies. Reuters said that strength has been underpinned by robust exports, big trade surpluses and heavy corporate conversion of foreign currency into yuan. A currency rising that fast squeezes exporters, and the speed of the move in October appears to have crossed a line for policymakers.

"The PBOC has sent a clear message to the market that it is concerned about the fast appreciation of the yuan," said Zhiwei Zhang, chief economist at Pinpoint Asset Management, quoted by Dow Jones. "China's economy heavily depends on exports. A moderate appreciation may be tolerated, but the speed in October likely raised concerns." Marco Sun, chief financial market analyst at MUFG (China), told Reuters the bank was "responding to strong market-driven yuan appreciation" and, by absorbing part of the available U.S. dollar liquidity in the banking system, was trying to reduce the momentum behind the rise and prevent one-way expectations from building.

Key facts

• New ratio: 6%, up from 4% — a 2-percentage-point increase.
• Start date: November 15, 2026.
• Scale: An extra $24 billion withdrawn from the financial system, by a Reuters calculation based on official FX deposit data.
• Market reaction: Onshore yuan down as much as 0.37% to 6.6728 per dollar, the weakest since October 23; offshore dollar up 0.3% at 6.6639 yuan.
• Context: The yuan is up more than 5% this year, its strongest since 2022.
• Reversal: In September 2023 the PBOC cut this same ratio to stem rapid yuan losses and capital outflows — Tuesday's hike reverses that stance.

Beijing has also come under pressure from major trading partners to let the yuan strengthen to help rebalance trade surpluses by making Chinese exports less competitive, Dow Jones reported. Chinese policymakers, however, have signalled a preference for mild, gradual appreciation rather than a fast climb.

What is next

Analysts do not expect this single move to reverse the yuan's upward trend. Zhaopeng Xing, senior China strategist at ANZ, told Reuters the hike was likely to "carry greater symbolic significance" and would not be enough on its own to ease the oversupply created by corporates settling more foreign currency into yuan. PBOC Deputy Governor Zou Lan also reiterated on Tuesday, at a financial forum in Hong Kong, that China has promoted high-level opening-up and insists the market play a decisive role in forming the exchange rate. The test now is pace: whether the yuan's climb slows into the gradual path officials say they want, or whether further steps follow if it does not. This report describes what happened and why markets reacted; it is not financial advice.

Sources

Reuters — China to raise FX reserve requirement to slow yuan's rally
Dow Jones via Morningstar — China's central bank tweaks forex reserve rules to steady yuan

FAQ

What did the PBOC change on November 3?

It raised the foreign-exchange reserve requirement ratio for financial institutions by 2 percentage points, to 6% from 4%, effective November 15.

Why is China trying to slow the yuan?

The yuan has risen more than 5% this year to its strongest since 2022, and analysts say the speed of the October rise worried policymakers because a fast-climbing currency hurts exporters.

How much money does the change pull out?

About an extra $24 billion, according to a Reuters calculation based on official foreign-exchange deposit data.

Did the yuan fall after the announcement?

Yes. The onshore yuan weakened as much as 0.37% to 6.6728 per dollar, its weakest since October 23, and was set for its biggest one-day drop since May 15.