Economy: Chinese banks boost dollar rates to curb the rise of the yuan

Better-paying dollar deposits. More than six banks operating in China have raised the rates they offer on U.S. currency deposits in recent weeks, according to banking sources interviewed by Reuters. Some offers now exceed 4% over one year. By making dollar deposits more attractive, these hikes could encourage exporters to retain their foreign exchange earnings and ease upward pressure on the yuan.

The key points of this article

More than six institutions, including state banks and foreign banks, have raised their rates on dollar deposits.

At a state bank, the one-year rate exceeds 4% for deposits over $50,000.

The yuan has appreciated about 10% against the dollar since the start of 2025, according to Reuters.

Reuters could not establish whether Chinese authorities had asked banks to raise rates.

Dollar deposits become more attractive in China

At one state bank, the one-year rate offered on some dollar deposits rose about 1.2 percentage points in a few months. In another public establishment, the proposed rates reached 4.5% at the end of October. For comparison, Reuters indicates that large state banks remunerate deposits in yuan around 0.95%, after several reductions. Two banking sources say they are already seeing new deposits from exporters and individuals.

This increase comes as foreign currency deposits in Chinese banks reached a record of $1.2 trillion at the end of September, up 17.7% year-on-year, according to central bank data cited by the press. The dollar offers of certain Chinese establishments now rival those of Hong Kong, where the rates recorded by the agency are slightly below 4%.

When a Chinese exporter converts its revenues into dollars, it sells greenbacks and buys yuan. If many companies carry out these conversions at the same time, they strengthen the demand for Chinese currency. A higher-paying dollar deposit gives companies that already have yuan cash a reason to delay the conversion. This effect can matter at the end of the year, when some companies usually sell foreign exchange to pay their bonuses and cover their local expenses.

The People's Bank of China is also acting on another lever. She announced that the ratio of required reserves to foreign currency deposits would increase from 4% to 6% on November 15. Banks will therefore have to immobilize a larger share of these deposits. Both measures can help moderate the appreciation of the yuan, through different channels.