China News Service, Beijing, December 9th (Reporter Xia Bin) The Central Bank of China announced on the 9th that in order to strengthen the management of foreign exchange liquidity of financial institutions, it has decided to increase the foreign exchange deposit reserve ratio of financial institutions from December 15, 2021. 2 percentage points, that is, the foreign exchange deposit reserve ratio will be increased from the current 7% to 9%.
The central bank previously adjusted the foreign exchange deposit reserve ratio on June 15 this year, when it was raised from 5% to 7%.
Wang Youxin, a senior researcher at the Bank of China Research Institute, said in an interview with a reporter from China News Agency that the foreign exchange deposit reserve ratio is an important macro-prudential policy tool. The determination to stabilize exchange rate movements.
Wang Youxin said that raising the foreign exchange deposit reserve ratio will freeze part of foreign exchange liquidity and push up domestic and foreign currency interest rates, which will narrow the spread between the renminbi and foreign currencies, partially reduce the demand for foreign exchange settlement, and curb the pressure of renminbi appreciation.
He further stated that the current adjustment is mainly due to the relatively strong performance of the renminbi recently. Although the dollar is appreciating, the renminbi is also appreciating.
China’s economic growth is still facing certain pressures. In order to avoid the impact of excessively rapid appreciation on the export sector and the formation of unilateral appreciation expectations, adjusting the foreign exchange deposit reserve ratio at this time will help stabilize the exchange rate trend and better serve the development of the physical sector.
"Furthermore, with the current global excess liquidity and relatively abundant domestic foreign exchange, raising the foreign exchange deposit reserve ratio in a timely manner will help improve foreign exchange supply and demand and push up the exchange rate of foreign exchange against RMB." Wang Youxin said.
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