China scraps risk reserve ratio for forward forex sales

China's central bank announced on Friday that it will scrap the foreign exchange risk reserve requirement ratio for forward foreign exchange sales, which currently stands at 20 percent, effective March 2, 2026. 

The move is set to promote the development of the foreign exchange market and support enterprises in managing exchange rate risks, said the People's Bank of China (PBOC), the country's central bank.

Experts noted that the adjustment will help lower the cost for enterprises to purchase foreign exchange forward contracts, thereby enhancing their willingness to conduct forex hedging. It will also support companies in making better use of foreign exchange derivatives to manage exchange rate risks, reported the Securities Times.

The move marks the first time in more than three years that the central bank has adjusted this policy tool. Analysts say the step represents a return to a more neutral foreign exchange policy stance.

The PBOC stated that, going forward, it will continue to guide financial institutions in optimizing services for corporate exchange rate risk management and keep the RMB exchange rate basically stable at an adaptive and balanced level.

(With input from Xinhua)