Chinese banks are sharply increasing interest rates on US dollar deposits in a move that could slow the yuan’s appreciation and ease pressure on the country’s exporters.
More than six banks, including state-owned, joint-stock and foreign lenders, have raised their dollar deposit rates to their highest levels since at least 2023, according to bankers familiar with the developments.
The increases are encouraging businesses and individual customers to retain their dollar holdings rather than convert them into yuan, potentially reducing demand for the Chinese currency and moderating its recent gains.
The move comes as the yuan has appreciated by about 10 per cent against the dollar since early 2025, putting pressure on Chinese exporters whose profit margins are already thin.
At one state-owned bank, dollar deposit rates reportedly climbed by about 80 basis points in recent months to 4.5 per cent in late October, the highest level since 2023.
Another state lender has raised its rates twice within two weeks, offering more than four per cent annually on one-year dollar deposits exceeding $50,000. This represents an increase of approximately 120 basis points from levels recorded a few months ago.
The higher returns contrast sharply with yuan deposit rates, which major Chinese state-owned banks have reduced to approximately 0.95 per cent.
Although the bankers said they were not informed of the reasons behind the increases, the developments suggest growing efforts to discourage dollar holders, particularly exporters, from converting their foreign earnings into yuan.
ING’s Chief Economist for Greater China, Lynn Song, said higher dollar deposit rates could help banks retain dollar deposits and maintain stable dollar funding while reducing pressure on the yuan to appreciate.
The rate increases also come amid efforts by China’s central bank, the People’s Bank of China (PBOC), to contain the yuan’s rapid appreciation. The regulator recently announced plans to increase the foreign currency reserves banks are required to hold, another measure aimed at managing exchange-rate pressures.
The yuan recently strengthened to 6.6449 against the dollar, its highest level in four years, supported by China’s record trade surpluses.
Meanwhile, foreign currency deposits in China reached a record $1.2 trillion at the end of September, representing a 17.7 per cent increase from a year earlier, according to PBOC data.
Reuters reported that the latest increases in dollar deposit rates could also attract foreign funds into Chinese banks, as their offers have become competitive with rates in the United States and Hong Kong.
