Catenaa, Friday, February 28, 2025-The People’s Bank of China (PBOC) have asked China’s banks to cut interest rates offered on U.S. dollar deposits to curtail dollar hoarding and prop up a weakening yuan, a report by Reuters said on Friday.
Quoting two banking sources, the Reuters report said that over the past few weeks banks across China have been asked to cut dollar deposit rates.
The report said Chinese mainland retail investors and exporters have built up nearly $ 1 trillion worth of deposits because of higher US yields and the yuan’s slide.
The sources said the guidance issued by PBOC seems to be aimed at discouraging a further rise in dollar deposits and spurring more conversion of those dollars into yuan.
“We’ve got the guidance from the superior that we need to lower the dollar deposit rates, and many of our peers have already done so,” one of the banking sources told Reuters, adding the regulators seem worried about the proportion of cash being held onshore in dollars.
Some banks have announced rate cuts. Bank of East Asia said on Wednesday that it will lower the one-year dollar deposit rate on $ 20,000 or more to 3.5% from the current 4.4% starting early March while Bank of Nanjing said in February that it has lowered interest rates on dollar deposits above $ 3,000 to 2.1% for three-month tenors from 4.3% set in January.
According to PBOC data, Foreign exchange deposits grew to $892.4 billion last month, the highest level since April 2023.
Households’ foreign exchange deposits stood at $146.1 billion, up 18% from a year earlier, and corporates’ deposits grew to $451.9 billion.
The PBOC had previously, in 2023, asked only the country’s big five state banks to cut dollar deposit rates, capping them at 2.8%.
