China Tightens Currency Control: State Banks Buy Dollars While Yuan Strengthens

China’s major state-owned banks have been aggressively purchasing US dollars in the onshore market, but haven’t used these funds to directly influence the yuan’s exchange rate. Instead, this move is a strategic attempt to curb the rising yuan value. Analysts suggest this approach involves holding onto dollar reserves instead of exchanging them for yuan in the swap market. The goal? To increase the cost of maintaining long-yuan positions and thereby slow down further appreciation.