China Encourages FX Hedging as Strong Yuan Impacts Exporters
Chinese foreign exchange regulators have been urging banks to promote greater currency risk hedging among corporate clients, particularly exporters facing losses due to the yuan's appreciation. The informal guidance from local branches of SAFE aims to raise hedging ratios and includes subsidies for companies increasing their use of currency options. This move reflects concerns over potential further gains or volatility in the yuan, which has risen nearly 4.3% this year against the dollar. Corporate demand for foreign exchange derivatives has surged as a result, with total contract value reaching $1.4 trillion in H1 2026—up about 40% from last year—and hedging ratios rising to 35.3%. While strong global demand for Chinese exports supports the economy amid weak domestic consumption, analysts note that FX losses have reached a decade high of around ¥70 billion or 4% of total earnings in H1. Despite these challenges, export-oriented companies' overall earnings growth has helped keep currency-related losses manageable. The guidance highlights policymakers’ proactive stance to mitigate risks and stabilize the sector.
Topics: currency exporters hedging policy guidance