China banks reportedly called upon by PBOC to cut rates on dollar deposits

The sources say that banks in China, no matter big or small, have been told by the PBOC to cut dollar deposit rates over the past few weeks. This is likely an attempt to prevent dollar holdings and encouraging more currency conversions into the yuan. One of the sources said that regulators were getting worried about the proportion of cash held onshore in dollars.

“We’ve got the guidance from the superior that we need to lower the dollar deposit rates, and many of our peers have already done so.”

“Yuan rates are so low now, everyone is doing a carry trade by making dollar deposits.”

This form of capital control isn’t new in Chinese banking circles but it’s worth noting how Beijing is feeling about the current situation at least. A silver lining in all this is that Trump’s tariffs on China have been less harsh than feared, allowing for the yuan to consolidate a fair bit since the end of January.

This article was written by Justin Low at www.forexlive.com.