Analysis-Chinese companies race to hedge against a swinging yuan with regulatory encouragement

The informal instructions, also known as window guidance, asked some banks in a coastal province to increase their corporate ​clients' hedging ratios to roughly 40%, one of the people said. Nationally it stands at ‌30%, up by eight percentage points from 2020, Li Bin, the deputy head of the State Administration of Foreign Exchange (SAFE), told a media briefing in January.

"We will continue to strengthen exchange-rate risk management services ... supporting businesses in better focusing on their core operations and mitigating risks," he said.

People's Bank of China Governor Pan Gongsheng told reporters at the National People's Congress last week that together with a 30% rate of using yuan in cross-border trade, it meant some 60% of trade "is relatively less affected by exchange-rate fluctuations."

"This ratio is projected to increase further this year," he said. The PBOC declined to comment when contacted by Reuters and SAFE did not immediately respond.

YUAN GAINS HURT EXPORTERS

Losses are another powerful motivator for companies that have been caught holding dollars as the greenback has given up nearly 6% of its value against the yuan over the past 11 months.

Huizhou Sanchuang Technology, a Chinese maker of cooling equipment, for example, has ‌drastically shifted its strategy compared with a year ago, said deputy financial officer Michael Don. Previously, the company kept idle cash in ​Hong Kong wealth management products, collecting income and gains as the dollar rose.

"Now, we settle the dollar receipts as soon as we get ​them," he said.

Beijing Ultrapower Software said the yuan's strength was partly to blame for a 28% plunge ​in its 2025 profit, according to a company filing.

Suzhou Junchuang Auto Technologies said a rising yuan was behind its 31% slump in its annual earnings; other firms disclosing foreign-exchange losses include ‌Robot maker Ninebot, Shenzhen Hello Tech Energy and Shenzhen Hui Chuang Da Technology.

In response, ​many firms have turned to forwards, options and swaps, said ​Liu Wencai, founder of risk-management consultancy D-Union.

D-Union found that a record 1,409 listed Chinese companies disclosed currency-risk hedging measures in 2025, up 13.5% from a year earlier. It added that this year, roughly 300 companies had already unveiled forex hedging plans.

Forex-risk hedging "would greatly improve corporate value and is more significant at a time when Chinese companies are ramping up overseas expansion," Liu said.

To be sure, the war in the Middle East ​has upended many expectations. And PBOC tweaks to forward reserve requirements have made selling ‌dollars in the forward market slightly more expensive, with both combining to halt yuan gains.

But companies have accumulated about $1 trillion in onshore dollar deposits and a further $2 trillion in overseas dollar assets, ​according to Soochow Securities estimates, so if even a fraction of that were to be hedged or repatriated due to uncertainty, that would be a significant shift in the flows in China's forex ​market.

(Reporting by Samuel Shen in Shanghai and Jiaxing Li in Hong Kong; Editing by Tom Westbrook and Thomas Derpinghaus)