Foreign exchange regulators in several regions of China are pressing banks to encourage corporate clients to increase their foreign exchange hedging, after the yuan appreciated about 6% against the US dollar over the past year, making it Asia's best-performing currency and adding pressure on Chinese exporters. At least two regional branch offices of the State Administration of Foreign Exchange, or SAFE, have instructed banks to raise the share of yuan hedging done by their clients, set specific targets for that business, and summon banks that fall short of those targets for discussions. SAFE offices in some regions are also offering subsidies to local companies that follow the guidance. Data compiled by Bloomberg show that the yuan hedging ratio of Chinese companies fell to 36.84% in July from a record high of 38.92% in June. SAFE said that in the first seven months of this year, the notional value of foreign exchange derivatives used for hedging exceeded 1.6 trillion dollars, up more than 40% from the same period a year earlier, while the hedging ratio, or the share of hedging transactions in all corporate foreign exchange transactions, stood at 35.5%, up 5.5 percentage points from the level for all of 2025. One example of the impact already felt is Guangdong TCL Smart Home Appliances, listed on the Shenzhen stock exchange, which reported that first-half net profit fell nearly 20% from a year earlier, mainly because of large foreign exchange losses.
Guangdong Homa Appliances Co LtdTCL Smart Home Appliances reported H1 net profit fell nearly 20% mainly from large FX losses caused by the yuan's appreciation.
