Hong Kong's savers turn to yuan

14:05, May 20, 2010      

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A growing number of Hong Kong residents are choosing to save in yuan and are opening bank accounts in Shenzhen as they believe the currency will continue to rise this year.

Statistics from Bank of China’s Shenzhen branch showed that yuan deposits in Shenzhen by Hong Kongers jumped 10 percent year on year in the first quarter of this year, and that Hong Kongers opened 20 percent more new accounts in the same period. The Hong Kong Monetary Authority also said yuan deposits in the territory climbed to 70.76 billion yuan (US$10.41 billion) in March, 7.1 percent higher than in February.

The Southern Metropolis Daily said yesterday that many Hong Kong residents were converting thousands of Hong Kong dollars into yuan each month to prevent further losses. During the May Day holidays, it was reported that several China Merchants Bank’s ATMs near Futian Checkpoint were unable to accept further yuan deposits because of the surge in deposits by Hong Kongers.

“Predictions that the yuan will keep gaining value have been attracting Hong Kong people to convert their assets into yuan,” said one Bank of China manager, identified only as Miss Tang.

Hong Kong’s near-to-zero savings rate is another reason Hong Kong people are saving in yuan across the border. The mainland’s one-year savings deposit rate is currently 2.25 percent, while Hong Kong’s is 0.01 percent with a minimum balance of HK$150,000. The savings deposit rate for balances below HK$5,000 is zero.

China has in effect pegged the yuan to the U.S. dollar since July 2008 in an attempt to cushion the economy from the global financial crisis. The euro has fallen about 14 percent against the U.S. dollar this year, almost half of that in the past month alone.

Yao Jian, an official with China’s Ministry of Commerce, said Monday the euro’s rise against the yuan “will increase cost pressure for Chinese exporters and also have a negative impact on China’s exports to European countries.”

Hans Redeker at BNP Paribas told the Financial Times yesterday that a disorderly fall in the euro could delay Chinese currency reform.

Source: Shenzhen Daily


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