China’s foreign exchange regulator urges banks to promote currency hedging

China’s foreign exchange watchdog is quietly leaning on banks to get their corporate clients to hedge more aggressively against currency swings. Some branches of the State Administration of Foreign Exchange (SAFE) have been issuing informal guidance to lenders, particularly those operating in the country’s export-heavy coastal provinces, to ramp up hedging activity among the companies they serve. The target is ambitious: regulators want certain banks to push client hedging ratios to roughly 40%, a benchmark that’s now being baked into regulatory performance assessments. The numbers tell the story China’s national corporate forex hedging ratio has been climbing steadily. It sat at 22% back in 2020. By January 2026, it had risen to 30%. The most recent figures peg it at approximately 35.3% for the first half of 2026. SAFE and the People’s Bank of China (PBOC) have been deploying what’s known in Chinese regulatory circles as “window guidance,” a polite term for regulators picking up the phone and telling banks what they’d like to see happen. No formal mandate, no published rule. Just a strongly worded suggestion with teeth. The push has driven record hedging volumes. In January alone,...