China Urges Banks to Boost Corporate Yuan Hedging
China’s State Administration of Foreign Exchange is urging banks to push corporate clients—especially exporters—to hedge more of their currency exposure as the yuan’s appreciation and heightened volatility threaten profits. The informal guidance, delivered through local branches, calls for higher hedging ratios, with some export-heavy regions encouraged to reach about 40%, while underperforming banks may face regulatory discussions. Authorities and banks are promoting forwards, options, swaps and operational measures such as changing invoicing currencies, with some branches subsidizing option premiums or otherwise reducing hedging costs. Corporate use of foreign-exchange derivatives has surged, with hedged transactions reaching 35.3% in the first half of 2026 and contract values approaching $1.4 trillion, about 40% above the prior year. The campaign reflects Beijing’s broader goal of encouraging companies to adopt a risk-neutral approach and limit earnings losses from further yuan gains or sharp exchange-rate swings.
