A stronger currency seems like good news: it allows you to buy more abroad. For a country that sells many products across the border, however, it can become a competitiveness problem. It is this balance that makes China’s new move on the yuan interesting, even for those watching the markets from Italy.
The People’s Bank of China announced that from November 15, 2026, the reserve requirement for foreign currency deposits will rise from 4% to 6%. The official motivation is to strengthen the management of currency liquidity of financial institutions.
Analysts see the intervention as a brake on the rapid appreciation of the yuan. For European businesses and savers, the question is how this decision can translate into costs, revenues and returns.
What did the Chinese central bank decide
The measure concerns the share of foreign currency deposits that institutions must set aside as reserves. For every 100 dollars of deposits subject to the requirement, the restricted amount goes from 4 to 6 dollars: two percentage points more.
There is, therefore, less foreign currency freely usable by banks. The change may affect currency market conditions and trader expectations.
It is not an increase in mortgage rates or a forced conversion of savings. It is also distinct from China’s recent new rules on short-term bank financing: that provision concerns the yuan money market, this one concerns foreign currency deposits.
Because Beijing wants to curb an excessively strong yuan
Before the intervention, the yuan had gained more than 5% against the dollar since the beginning of the year. Following the announcement, the currency traded in mainland China lost as much as 0.37% against the dollar. This decision is interpreted as a signal against expectations of one-way appreciation, without considering it sufficient to necessarily reverse the trend.
The economic reason is understandable. A Chinese exporter who cashes in dollars gets fewer yuan from their conversion when the national currency strengthens. If it incurs a large portion of its costs in China, margins may shrink.
On the contrary, a strong currency makes purchases from abroad less expensive. The benefit for those who import can become a difficulty for those who export: Beijing must keep both needs together.
What changes for those who buy and sell from Italy
For an Italian company, what matters above all is the relationship between euro and yuan, in addition to the currency envisaged in the contract. A weakening of the yuan against the dollar does not imply an identical move against the euro.
If the Chinese currency also lost value compared to ours, purchasing goods invoiced in yuan could cost less. For an Italian exporter, however, a product with a price set in euros would become more expensive for the Chinese customer.
| Situation | Possible effect of a weaker yuan against the euro |
|---|---|
| Italian company purchases components at a fixed price in yuan | The cost converted into euros decreases |
| Italian company sells in China at a fixed price in euros | Increases the buyer’s yuan outlay |
| Italian company collects fixed revenues in yuan | The value of revenues in euros decreases |
They are effects all other things being equal. Currency hedges, deadlines and renegotiations can change or delay them.
A purely illustrative example: a supply of 80,000 yuan costs 10,000 euros with an exchange rate of 8 yuan per euro. If the exchange rate goes to 8.4, the cost drops to around 9,524 euros, before commissions and other charges.
Will Chinese products cost less?
It is the question closest to daily spending, but the answer is not automatic. The exchange rate is only one component of the final price.
Transportation, duties, taxes, previously purchased inventory and trade margins also count. Furthermore, many supplies are settled in dollars or euros: in these cases the change in the yuan does not directly modify the amount of the already agreed invoice.
Any currency advantage could be passed on to the consumer, absorbed by other price increases or retained along the distribution. The Chinese decision alone does not announce discounts in Italian stores.
The exchange rate also counts for savings
Those who own assets denominated in yuan must consider both their yield and the conversion into euros. If the value of the investment remains unchanged in local currency, but the yuan loses value against the euro, the euro value decreases.
It is a component of financial risk to be distinguished from the performance of the company or the security purchased. Any currency hedging may mitigate this, depending on the characteristics of the instrument.
The data to follow will therefore be the euro-yuan exchange rate, together with the actual conditions of contracts and investments. The same fluctuation can lighten an invoice and reduce a collection: to understand what concerns us, we must first know in which currency we spend and in which we earn.
