Chinese banks lift dollar deposit rates as Beijing tries to slow yuan rally

Chinese banks are raising dollar deposit rates, in some cases above U.S. benchmarks, in unusually swift moves that bankers say are attracting cash and could temper gains in the yuan. Higher dollar deposit rates encourage savers and exporters to hold cash in dollars rather than in lower-yielding yuan deposits.

More than six banks, from state-owned institutions to joint-stock and foreign lenders, have raised dollar deposit rates in recent weeks to levels not seen since at least 2023, people at the banks said. The bankers spoke on condition of anonymity because they were not authorised to speak to the media.

What the banks are doing

At one state bank, deposit rates rose by about 80 basis points over the past few months to as high as 4.5% in late October. That was the highest level since 2023 and compared with rates of around 4.8% at U.S. banks, according to LSEG data. At another state bank, dollar deposit rates were raised twice in two weeks, with one-year rates now exceeding 4% on balances above $50,000, a person with direct knowledge of the rates said. The higher rates were attracting deposits.

Exporters and retail customers were taking advantage of the higher rates and making deposits, two people at separate banks said. The increases extend a months-long rise in dollar deposit rates in China. The latest moves, not previously reported, indicate that the trend is accelerating, signal an end to a de facto cap on state banks' dollar rates and suggest that efforts to slow the yuan's appreciation are intensifying.

Policy backdrop

The People's Bank of China (PBOC) did not respond to a faxed request for comment on whether policymakers directed banks to raise dollar deposit rates. The central bank typically issues informal guidance on such rates to state banks. It could not be determined whether policymakers had directed banks to raise rates.

The increases come amid some of the strongest efforts yet to rein in the yuan's rally, which has lifted the currency by about 10% against the dollar since early 2025. On Tuesday, the PBOC announced it would raise the foreign currency reserves banks are required to hold.

Exporter pressure

"The current exchange rate is not particularly favourable for exporters," said one person at a state bank. "To avoid being forced into converting FX back into yuan, banks can help offset some of the pressure," the person said.

A prolonged currency rally has begun to squeeze exporters' already thin profit margins. Chinese banks have been using their dollars to buy U.S. Treasuries, a shift in their investment strategy reported in September, and some continued to do so, a person at a joint-stock bank that has been buying Treasuries said.