China’s state-owned banks are selling US dollars onshore to stabilize the yuan and counter negative market sentiment on equities.

The move is seen as a policy signal to prevent the yuan from depreciating too quickly.

The Shanghai Composite index has seen its largest one-day decline since April 2022, down 2.7%. Approximately $1.6 billion worth of Chinese stocks have been liquidated by foreign funds this year, as signs of a recession in the second-largest economy shake investor confidence.

State banks are also selling dollars in the onshore spot foreign exchange market to maintain the 7.2 per dollar level.