The BPC will reduce the rate of foreign exchange reserves of banks

by Winni Zhou and Vidya Ranganathan

SHANGHAI, April 25 (Reuters) – The People’s Bank of China (PBOC) said on Monday it would ease its foreign exchange reserve requirements in a bid to slow the yuan’s depreciation.

From May 15, the rate of compulsory foreign exchange reserves that banks must hold at the central bank will be lowered by 100 basis points, bringing it from 9% to 8%, in order “to improve the ability of financial institutions to use funds in foreign currencies,” the BPC said in a statement.

In December 2021, the BPC raised this ratio for financial institutions by 200 basis points to make it more expensive for Chinese banks to hold dollars.

The yuan, which lost more than 3% against the dollar during March, hit its lowest level in a year at 6.5775 to the dollar on Monday, on concerns over deteriorating growth prospects with the strict restrictions put in place in the country and in particular in the economic capital Shanghai.

(Beijing office, French version Laetitia Volga, edited by Matthieu Protard)