China's US Dollar Deposit Rates Reach 4% Amid Banking Competition
Banks in China are raising US dollar fixed deposit rates to as high as 4 percent, intensifying competition for new funds amid a strengthening yuan. Offshore banks operating in China are offering some of the. . .
Banks in China are raising US dollar fixed deposit rates to as high as 4 percent, intensifying competition for new funds amid a strengthening yuan. Offshore banks operating in China are offering some of the most attractive fixed deposit rates, which pay a fixed interest over a predetermined period. Chinese joint-stock and regional commercial banks are also actively vying for foreign currency deposits, with most products now providing interest rates exceeding 3 percent. For example, Hang Seng Bank, based in Hong Kong, launched a promotional rate in July for new US dollar fixed deposits with a minimum of USD 20,000. Its one-month US dollar fixed deposit currently offers an annualized rate of 4 percent, making it the highest among similar offerings. This spike in deposit rates is driven by various factors, including the exchange rate environment, fierce deposit competition, and expectations of rate cuts by the Federal Reserve. These elements have resulted in an unusual situation where short-term deposits yield higher rates than longer-term ones. Leading the charge, Hong Kong’s Bank of East Asia is running promotional offers for new individual customers, with annualized rates between 3. 2 percent and 3. 4 percent for US dollar fixed deposits, requiring minimum deposits of USD 10,000 to USD 50,000. These rates are available until August 31. Chinese banks have followed suit but generally with lower deposit minimums. China Minsheng Bank and China Citic Bank are offering annualized rates of 3. 1 percent and 3 percent, respectively, for deposits over USD 100. Shenyang’s Shengjing Bank only demands a minimum deposit of USD 50 and offers rates of 3. 1 percent on both one- and two-year deposits. Meanwhile, Bank of Beijing provides a 3 percent annual rate on one-year US dollar fixed deposits, with a minimum deposit of USD 5,000. The recent rise in US dollar fixed deposit rates is influenced by a combination of the exchange-rate trend and banking strategies. Since the end of 2025, the yuan has been on an appreciation streak, appreciating over 3 percent against the US dollar this year alone. According to Zeng Gang, head of a financial research institute, the stronger yuan has led foreign exchange holders to be less inclined to convert their assets into yuan, and residents and businesses are increasingly holding their wealth in US dollar deposits. Consequently, some city commercial and foreign banks are competing actively for these funds, leveraging higher interest rates to attract new depositors. Yuan-denominated deposits declined for two consecutive months in April and May, dropping over CNY 2 trillion (roughly USD 296. 5 billion). Household deposits only rebounded in June, as depositors chose not to renew maturing low-interest deposits, instead shifting their funds into various asset management products and capital markets. Yuan deposit rates have fallen to about 1 percent, prompting banks to offer higher rates on US dollar deposits to compensate for the low returns on yuan deposits and to attract new funds — said Lou Feipeng, from Postal Savings Bank of China. An unusual inversion of the typical pattern has emerged, with short-term deposit rates surpassing those for medium and long-term deposits. For example, China Minsheng Bank offers an annualized rate of 3. 1 percent on one-year US dollar deposits, compared to 2. 8 percent for two-year deposits. Zeng believes this phenomenon is due to generally stable expectations for the Federal Reserve’s rate-cut trajectory, with banks expecting medium- and long-term US dollar interest rates to decline further. Locking in two-year liabilities now at high costs could lead to asset yields falling over the period, risking that banks pay more interest on deposits than they earn from their linked assets.