China is moving to contain two opposing market pressures, a collapsing stock market and an appreciating currency, through measures that could restrict corporate financing while drawing renewed scrutiny from Washington.
Beijing has reportedly instructed investment banks to pause initial public offerings, while its central bank has confirmed plans to lock up an estimated $24 billion more in foreign-currency reserves.
The interventions follow an 8.5% October decline in the CSI 300 Index, its worst monthly performance in more than a decade. At the same time, the yuan has strengthened more than 5% against the US dollar this year, creating a different concern for an economy heavily dependent on exports.
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A $24-billion currency move faces US scrutiny
The People’s Bank of China announced Tuesday that it would increase the foreign-exchange deposit reserve requirement for financial institutions from 4% to 6%, effective November 15.
The adjustment would require banks to hold approximately $24 billion more in foreign-currency reserves, according to Reuters, which calculated the amount using official deposit figures.
The central bank described the decision as a measure to strengthen foreign-exchange liquidity management. It did not announce a target exchange rate or characterize the change as an effort to weaken the yuan.
Analysts cited by the outlet, however, interpreted the move as an attempt to moderate the currency’s appreciation by reducing the supply of dollars available within the banking system.
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The onshore yuan weakened as much as 0.37% following the announcement, reaching 6.6728 per dollar, its lowest level since October 23.
The decision also reverses the direction of China’s September 2023 policy, when the central bank lowered the same reserve requirement from 6% to 4% while attempting to counter yuan depreciation and capital outflows.
The latest reversal carries a potential diplomatic complication. In July, the US Treasury Department warned that evidence of China intervening through formal or informal channels to resist yuan appreciation could justify a future currency-manipulator designation.
Treasury placed China on its currency-monitoring list but declined to designate it a manipulator in that report, which examined policies through December 2025.
Reported IPO restrictions put chip financing at risk
China’s securities regulator has separately told investment banks to suspend IPOs and temporarily restrict large share sales by existing shareholders, according to a Financial Times report.
The newspaper cited three people familiar with discussions involving the China Securities Regulatory Commission. The guidance was reportedly delivered informally during meetings over the preceding days.
If implemented broadly, the restrictions would reduce the supply of shares entering the market while limiting companies’ ability to raise new equity capital, interrupting a significant source of corporate financing. Chinese companies have raised more than RMB 292 billion through IPOs this year, according to the Financial Times, the highest annual amount since 2023.
One potentially affected transaction involves Yangtze Memory Technologies, a major Chinese semiconductor producer whose parent company, CCSH, submitted plans in August for a Shanghai IPO targeting RMB 33 billion, approximately $4.9 billion.
According to the company’s proposed fundraising plan, RMB 20.8 billion would support production-line upgrades, while another RMB 12.2 billion would finance research and development.
The proposed listing is particularly significant because China has prioritized domestic semiconductor production as US export restrictions limit access to advanced foreign technology.
Beijing adds liquidity while restricting share supply
The reported IPO intervention follows a separate package of market-support measures announced on Monday. Chinese authorities authorized another round of securities swap operations, with 31 brokerages and fund managers seeking more than RMB 100 billion, approximately $15 billion, in liquidity to finance stock purchases.
The central bank also made its share-buyback relending facility permanent and reduced the facility’s interest rate to 1% from 1.25%.
Regulators separately encouraged major index constituents and leading technology companies to repurchase shares, while considering adjustments to margin-financing rules.
The measures are aimed at strengthening demand for existing shares, while the reported issuance restrictions would reduce new supply. The foreign-currency reserve increase operates through a separate banking mechanism and addresses different market conditions.
Initial market results suggested the equity-support measures had not restored confidence. The CSI 300 closed Tuesday down 0.2%, at 4,008.87 points, after falling as much as 1.2% during trading. The technology-heavy STAR 50 Index lost nearly 4%, according to Bloomberg reporting.
