(ECNS) -- China's central bank, the People's Bank of China (PBOC), has announced that it will begin imposing the reserve requirement ratio (RRR) on deposits placed by overseas financial institutions at their local branches from January 25.
The overseas financial institutions do not include foreign central banks, official reserve and management insitutions, international financial organizations, or sovereign wealth fund.
According to Sunday's announcement, the central bank will set the RRR for overseas yuan participating banks to the current RRR level for domestic banks.
In December 2014, the central bank established the RRR for offshore yuan participating banks, setting the rate at zero.
Dong Dezhi, an analyst at Guosen Securities, estimated current offshore yuan deposits at around 1.3 trillion yuan and expected the central bank's move to lock up more than 200 billion yuan, thus squeezing supply of the currency to the offshore market.
However, Dong was not sure whether such a move is aimed at stemming speculation in the currency, and said its implications on the yuan's value also remain unknown.
Shi Lei, head of fixed income research at Ping An Securities, expected some 90 percent of offshore yuan to be deposited back into domestic financial institutions, so that the central bank can directly participate in the management of offshore yuan.
