The State Administration of Foreign Exchange and the People’s Bank of China are encouraging banks to increase corporate currency hedging ratios to 40%. This target is being integrated into regulatory performance assessments for lenders, particularly in coastal provinces.
National corporate forex hedging ratios have shown consistent growth, rising from 22% in 2020 to 30% in January 2026, and reaching approximately 35.3% in the first half of 2026. Regulators are utilizing informal window guidance to drive these metrics.
Market activity has reached record levels, with net selling of foreign currencies through forwards totaling $39 billion in January. According to PBOC Governor Pan Gongsheng, 60% of trade currently benefits from reduced exchange-rate impact.
To facilitate this shift, the PBOC reduced the forex risk reserve requirement from 20% to 0% on March 2, 2026. This measure eliminates a cost previously passed to clients, making hedging more accessible for smaller firms.
