Hong Kong Banks Seek To Attract Yuan Deposits
Beginning on Feb. 25, Hong Kong banks were allowed to
take yuan deposits for the first time. In order to attract
yuan deposits, the banks have engaged in offering competitive
interest rates to attract yuan deposits and customers.
The current regulations only allow a depositor to deposit
20,000 yuan (US$2,439) each day in a savings account.
For the Hong Kong government, the bet was that there were
a lot of yuan brought into the SAR by the large number
of Chinese tourists coming into Hong Kong. In the second
part of 2003, the Chinese government encouraged tourist
visits to Hong Kong by Chinese citizens to help boost
the Hong Kong economy. Chinese government restrictions
were that each tourist was only allowed to bring in a
limited amount of yuan to spend in Hong Kong, but this
restriction was widely overlooked. When they got to Hong
Kong, they changed their yuan to Hong Kong dollars, meaning
that many of the money changers were holding large amounts
of yuan.
It turned out that some of the wealthier tourists from
China even bought property in Hong Kong, giving a boost
to the local economy.
Now, Hong Kong's banks want to bring the yuan from under
the money changers' mattresses back into the banking system.
If reports from the first day of the yuan savings account
offering are any indicator, they are reluctant to do so.
Only 383 million yuan were deposited on the first two
days of the service.
From Beijing's point of view, the new Hong Kong policy
is a first step in developing the convertability of the
yuan. While the Americans, Europeans and Japanese pushed
last year for the yuan to become a convertible currency,
the Chinese government has adopted a much more cautious
approach, appointing certain banks overseas as currency
exchange centers where the yuan can be exchanged.
To soak up all the cash in the market, the Chinese government
has also begun to the bond market, and recently the Hongkong
and Shanghai bank was allowed to become the first foreign
underwriter in China of domestic bonds.
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