Key facts
- More than six Chinese banks raised dollar deposit rates to levels not seen since at least 2023, people at the banks said.
- One state bank's dollar deposit rates rose about 80 basis points to as high as 4.5% in late October, a person there said.
- Another state bank raised rates twice in two weeks, with one-year rates above 4% on balances above $50,000, a person with direct knowledge said.
- A third state bank offered to match the US secured overnight financing rate of 3.97% for top clients' dollar deposits, a person there said.
- Yuan deposit rates at major state lenders stand at 0.95% after repeated cuts, the report said.
- Foreign currency deposits reached a record $1.2 trillion at end-September, up 17.7% from a year earlier, PBOC data showed.
Several Chinese banks have raised dollar deposit rates in recent weeks to levels not seen since at least 2023, according to people at the banks, in moves that encourage savers and exporters to hold dollars rather than yuan. More than six banks, spanning state-owned, joint-stock and foreign lenders, made the increases, the people said, speaking on condition of anonymity because they were not authorized to speak to the media.
At one state bank, dollar deposit rates rose by about 80 basis points over the past few months to as high as 4.5% in late October, a person there said, the highest since 2023 and against rates around 4.8% at US banks, according to LSEG data. At another state bank, rates were raised twice in two weeks and one-year rates now top 4% on balances above $50,000, some 120 basis points higher than a few months earlier, a person with direct knowledge of the rates said. A third state bank offered to match the US secured overnight financing rate, at 3.97%, for some of its most creditworthy clients' dollar deposits, a separate person at that bank said. Several foreign banks are offering dollar deposits above 4%, the bankers said.
The increases extend a months-long rise in dollar deposit rates in China and suggest an end to a de facto cap on state banks' dollar rates, Reuters reported. Chinese banks have repeatedly cut yuan deposit rates, leaving them at 0.95% at major state lenders. The People's Bank of China announced on Tuesday it would raise the foreign currency reserves banks must hold, part of efforts to rein in a yuan rally that has lifted the currency about 10% against the dollar since early 2025. The yuan hit a four-year peak of 6.6449 per dollar in the week before November 9, and foreign currency deposits reached a record $1.2 trillion at end-September, up 17.7% from a year earlier, PBOC data showed.
Reuters said it could not determine whether policymakers had directed banks to raise dollar deposit rates. The PBOC did not respond to a faxed request for comment. The bankers said they were not told why rates were being raised; one source said the increases may also aim to offset typical year-end yuan buying, when companies sell dollars to fund bonuses and meet accounting requirements. The increases also partly reflect rising US rates, after the Federal Reserve in September raised its overnight rate window target by 25 basis points to 3.75-4%, though they have moved faster than the Fed and are competitive with offshore rates in Hong Kong just below 4%, according to offers published online.
"Higher USD deposit rates may be set with the intention to retain dollar deposits and maintain steady dollar funding," said Lynn Song, chief economist for Greater China at ING. "With higher dollar deposit rates, it may discourage some exporters to convert accumulated dollar balances into yuan, which could reduce some of the yuan appreciation pressure."