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Sunday, August 13, 2000, updated at 16:01(GMT+8)

Foreign Currency Savings Fly High in China

Foreign currency saving deposits have grown drastically as the interest rates of Chinese banks for foreign currency accounts registered growth from June 1.

The dramatic rise in individual foreign currency transactions, prompted by growing savings deposits, is incredible for many financial insiders.

"During the first half of this year, not only the trading cases but transaction volume has seen two-digit growth compared with the same period of the previous year,'' said Sun Yimin, an official of the Beijing branch of the People's Bank of China.

In addition to interest rate factors, Sun attributed the rise to changing investment patterns and convenient services, involving combining telecom and automatic transaction with counter exchanges, and prolonging business hours, offered by various banks.

According to sources from the PBC, from January-June, the individual foreign exchange transaction volume, including buying and selling, in the Bank of Communications Beijing branch increased 30.8 per cent from the corresponding period last year to hit US$3.9 billion, US$1.2 billion more than the total annual volume of last year.

For the Beijing branch of the China Construction Bank, the average daily foreign exchange transaction cases exceeded 1,000, with the monthly trading volume hitting US$12 million in June.

It is most obvious in more than 100 outlets of Bank of China around the city, which foreign exchange transaction volume as a whole soared by 10 million yuan (US$1.204 milion) in June from May of this year.

"The foreign exchange market is somewhat fairer than the stock market, for there is few robust institutions which can greatly influence this tremendous market,'' said Zhang Yulin, a professor with the University of International Business and Economics.

Zhang said in the stock market, investors can only earn in light of his or her sellings on bullish prices, but in the foreign exchange market, dealers can earn money via differences on interest rates or exchange rates or both, resulting in more profitable opportunities.

"Under a planned economy in the past and relatively low incomes, Chinese residents were not familiar with currency exchange markets, although it has been an ordinary investing channel for the population in developed countries,'' Zhang said.

Insiders warned that Chinese people should prepare for possible risks, since the foreign exchange market in China is immature.

A bottleneck in the development of the individual foreign exchange market was caused by the renminbi not achieving free convertible currency in the world market.

Other problems have impeded information channels.

Investors must closely observe related political and economic fluctuations in the world, grasp basic policy and market analysis skills and keeping cool-headed to exempt various risks.

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Foreign currency saving deposits have grown drastically as the interest rates of Chinese banks for foreign currency accounts registered growth from June 1.

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