Chinese banks are raising rates on US dollar deposits in a coordinated move to slow the yuan's appreciation. At least five institutions, including state-owned and joint-stock banks, have increased dollar deposit rates to around 3.61%, matching the US Secured Overnight Financing Rate. This incentivizes companies to hold dollars rather than converting them to yuan, easing upward pressure on the currency.
The yuan has gained over 3% against the dollar this year, driven by strong export activity. Chinese authorities are acting to prevent excessive strength that could harm the economy. The People's Bank of China has not confirmed the shift, but the approach is a sharp reversal from 2023, when dollar deposit rates were capped at 2.8% to discourage dollar hoarding during yuan weakness.
For investors, this policy pivot reflects Beijing's pragmatic, reactive approach. By keeping more dollars in domestic accounts, capital flows shift, potentially reducing demand for hedging assets like Bitcoin. The move underscores China's willingness to use targeted measures rather than public announcements to manage its currency.