In the face of the continuous decline of the exchange rate of RMB against the U.S. dollar, the central bank announced on September 26 that in order to stabilize foreign exchange market expectations and strengthen macro prudential management, the People's Bank of China decided to raise the reserve ratio for foreign exchange risk of forward foreign exchange sales from 0 to 20% from September 28, 2022, following the 2 percentage point reduction of the reserve ratio for foreign exchange deposits of financial institutions on September 5. Zhou Maohua, the financial market analyst of Everbright Bank, told the reporter that the foreign exchange risk reserve ratio of forward foreign exchange sales business mainly refers to that commercial banks need to pay a certain proportion of foreign exchange risk reserve to the central bank when they do forward foreign exchange purchase business for enterprises. By raising the foreign exchange risk reserve ratio, the Central Bank will help reduce the demand for immediate foreign exchange purchases by banking and financial institutions. At the same time, it will release a signal of stability to the market and strengthen market expectation management, which will help curb speculative demand and promote the balance between supply and demand in the foreign exchange market. After the news was released, the offshore RMB rose more than 300 points against the US dollar in a short term. "In recent years, due to multiple factors, the RMB has continued to depreciate and the pressure on cross-border capital outflows has increased. To raise the foreign exchange risk reserve ratio of forward foreign exchange sales business from 0 to 20% will appropriately increase the cost of purchasing foreign exchange forward, reduce the demand of enterprises and individuals for forward foreign exchange, so as to further curb foreign exchange appreciation, ease the pressure on RMB depreciation, and help maintain two-way fluctuations in the RMB exchange rate at a reasonable and balanced level 。” Dong Ximiao, chief researcher of Zhaolian Finance, said. The chief macro analyst of Dongfang Jincheng believes that the focus of current exchange rate stabilization is not to hold a fixed point, which leads to the RMB following the sharp appreciation of the US dollar against other currencies, but to keep the three major RMB exchange rate indexes basically stable and stabilize the foreign exchange market expectations. This is an effective response to the current situation that gives consideration to internal and external balance. This means that this increase in the foreign exchange risk reserve ratio of forward foreign exchange sales business is not intended to reverse the devaluation of RMB against the U.S. dollar, but to moderately increase the friction of exchange rate fluctuations, so as to avoid the tendency of RMB to separate from the U.S. dollar trend and depreciate rapidly alone. Wen Bin, Chief Economist of China Minsheng Bank, said that it is expected that the GDP growth in the third quarter will pick up significantly compared with the second quarter, the inflation level will be moderate and controllable, and the balance of payments will be in good condition, especially the current account and direct investment and other basic balance of payments projects will maintain a high surplus, laying the foundation for the stability of the RMB exchange rate and the smooth operation of the foreign exchange market. There is no basis for continuous depreciation of the RMB. From the data of bank settlement and sales of foreign exchange just released in August, the settlement rate measuring the willingness to settle foreign exchange is 71%, which is 3 percentage points higher than the monthly average since this year. It can be seen that under the current RMB exchange rate point, market participants have strong willingness to settle foreign exchange and will become an important market support force for the RMB exchange rate. (Liu Xinshe)