PBOC Shanghai Branch Removes Foreign Currency Deposit Rate Ceiling

Written by Fiona Zhao || 07 Jul 2014

On March 1st, 2014, Shanghai FTZ has removed the cap for foreign currency deposit rates, which apply to small accounts with less than USD3 million. After the three-month pilot, the market seems to be running steadily and enterprises in the Shanghai FTZ now can ask for higher rates for their forex deposits with the banks.

After the trials’ success, Shanghai PBOC branch announced officially that the rule will now apply for whole Shanghai starting June 27th, 2014. It will follow the guideline of removing the cap on corporate deposits first, individual deposits second. With the new regulation financial institutions now can provide higher returns on foreign currency for more valuable clients.

As the total amount of forex deposits is not large compared to RMB deposits, the releasing of rate ceiling will not have a great impact on the interest rates in the country. Also, current 1-yr dollar deposit rate ceiling is 3%, its average national wide is 1.076%, thus today banks are not motivated to pay higher rates even though they can. Therefore, introduction of foreign currency deposit rate based on supply and demand should be seen as just one more tiny step towards the coming RMB deposit rate reform.

dollar deposit rate china

Kapronasia Newsletter

Sign up for our email list and stay up to date with our latest insights.