China's state banks have reduced rates on deposits in dollars

China's state banks have reduced rates on deposits in dollars
Photo by Li Yang / Unsplash

Four major state banks in China have reduced rates on deposits in dollars amid the fall of the yuan due to high demand for dollars in the banking system, writes Bloomberg.

Industrial & Commercial Bank of China Ltd., Bank of China Ltd., Agricultural Bank of China Ltd. and China Construction Bank Corp. cut the rate ceiling - that is, the spread over the overnight secured lending rate in the United States, for companies and for individuals. Some of their provincial branches are offering their largest customers about 5.7% dollar deposits, up from 6% previously.
Because of the widening interest rate gap in the U.S. and China, the yuan fell 3% against the dollar. China's deposit rate cut, while limited in scope, shows the efforts of the country's authorities to cope with the strong fall of the yuan.
Economists believe the drop in dollar-denominated deposit rates is intended to reduce the impact of lower RMB interest rates to finance purchases in dollars.
China's central bank and currency regulator are seeking to limit currency speculation and try to strengthen management of dollar deposits. China's banking system held $881.9 billion in foreign currency at the end of April.