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The nation's central bank raised the US and Hong Kong dollardeposit ratesyesterday following a recent 0.25 percentage rise in the US Fed's deposit rate.
One-year deposit rates for US and Hong Kong dollars jumped by 0.375 percentage point, with 2 per cent and 1.875 per cent as the cap respectively after the adjustment.
"The People's Bank of China's decision is to ease the pressure on US dollars being exchanged into renminbi after the central bank revalued the currency by a moderate 2.1 per cent on July 21," Zhang Xuechun, an economist from the Asian Development Bank in Beijing told China Daily.
"Besides, it also helps prevent the outflow of US dollars after the United States Federal Reserve Board raised the deposit rate by a quarter of a point."
According to Zhang, the central bank's move will have a significant impact on big depositors.
"For a US$1 million as a deposit, the rise will add another US$3,750, an amount that is still appealing" Zhang said. "For small depositors, the influence is limited as they are not so sensitive to the deposit change."
According to Wang Yuanhong, a senior economist at the State Information Centre, the deposit change is a further step towards market-oriented operations.
"Raising the cap on US and Hong Kong deposits leaves more room for the central bank's adjustment," Wang said.
However, Toshi Honda, a currency strategist in London at Mizuho Corporate Bank Ltd, a unit of Japan's biggest bank, said the change would have little impact.
"We keep one eye open on all developments out of China but this announcement doesn't mean very much. It's still a very low rate," said Honda.
It is the third time that the central bank has raised the deposit rate this year.
(China Daily)
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Updated: 2005-08-23 10:14
