Official reports from the People's Bank of China and the Hong Kong Monetary Authority

China Raises Macro-Prudential Parameter to 1.75, Uses Interest Rates and RRR to Stabilize Yuan

Jan 13, 2025, 01:39 AM

China's central bank and foreign exchange regulators have taken steps to stabilize the weakening yuan, which has been trading near a 16-month low against the U.S. dollar. The People's Bank of China (PBOC) and the State Administration of Foreign Exchange (SAFE) have increased the macro-prudential adjustment parameter for cross-border financing from 1.5 to 1.75, effective immediately, to enhance liquidity and curb unilateral depreciation of the yuan. PBOC Governor Pan Gongsheng has committed to maintaining the yuan's exchange rate at a reasonable and balanced level, and will use tools such as interest rates and the required reserve ratio to ensure ample liquidity in the market. Additionally, the PBOC and the Hong Kong Monetary Authority will set up a CNY 100 billion liquidity facility for trade finance. These measures follow a recent meeting of the China Foreign Exchange Committee in Beijing, where the focus was on increasing forex market resilience and correcting pro-cyclical market behaviors, with verbal warnings issued to support the yuan.