China boosts key parameter to 1.75 to enhance cross-border financing

China on Monday adjusted a critical macro-prudential management parameter to 1.75 aiming to enhance cross-border financing options for companies and financial institutions, an official statement said.

The macro-prudential adjustment parameter, a multiplier that determines the maximum allowable cross-border financing for institutions, has been revised from 1.5 to 1.75, with immediate effect, according to a joint statement by the People's Bank of China (PBC) and the State Administration of Foreign Exchange (SAFE).

The upward revision aims to enhance the macro-prudential oversight of cross-border financing, and encourage enterprises and financial institutions to refine their asset-liability management, the statement added.

The China Foreign Exchange Committee recently held a meeting in Beijing, emphasizing the importance of maintaining the basic stability of the yuan exchange rate within a reasonable and balanced range, according to a statement on the PBC website on Monday.

According to the meeting, the PBC and the SAFE will take comprehensive measures to stabilize market expectations, strengthen foreign exchange market resilience, and strengthen foreign exchange market regulations.

It said the financial authorities will resolutely correct the pro-cyclical market behaviors, resolutely punish behaviors that disrupt market order, and resolutely prevent the risk of foreign exchange rate overshooting.

The financial regulator previously adjusted the parameter from 1.25 to 1.5 in July 2023.

The central parity rate of the yuan strengthened 6 pips to 7.1885 against the US dollar on Monday, according to the China Foreign Exchange Trade System.