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.
