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Several major state-owned commercial banks have recently lowered their dollar deposit rates for the second time in a month, according to state-owned media, as authorities stepped up efforts to arrest a slide in the yuan.
Interest rates offered by the “Big Five” state-owned lenders on most dollar deposits are now capped at 2.8%, down from 4.3% previously, according to state-backed China Securities Journal. The banks include Industrial and Commercial Bank of China, Bank of China, Agricultural Bank of China, China Construction Bank, and Bank of Communications.
While the move the cut the dollar rates was the banks’ own business decision based on market performance, the move indeed helps ease the market expectation for the Chinese yuan’s one-way depreciation, stabilize the yuan’s exchange rate and push the market into a rational state, the newspaper said, citing unnamed expert.
Traders and analysts said policymakers, worried that a prolonged yuan slide could both discourage foreign investment and spur an outflow of funds abroad, want to bring down dollar deposit rates towards domestic rates, which have been cut to aid the flagging economy.
The lower rates could both discourage households from putting savings into higher-yielding dollar deposits and nudge Chinese firms, especially exporters, to settle foreign exchange receipts in yuan.
Before the latest cut, the big state banks had in early June lowered such rates as much as 100 basis points from the previous ceiling of 5.3%.