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(Edit 4/14/12) -- to add WSJ article, "Yuan Bet Unwinds," in quick summary.

Further to the "Bank of China: invest in yuan account" thread * from about a year ago:

BOC NY branches are offering a Chinese New Year special on RMB CDs, as follows:

1-year 2.58% APY
6-month 1.68% APY
3-month 1.28% APY

Offer runs through 2/21/2012. $10k minimum, new money required. More details at: http://www.bocusa.com/portal/newsContent?newsId=99&lang=1

FDIC insurance applies. Only risk is adverse exchange rate movement, but that seems very unlikely. RMB has appreciated against USD something like 10% over past 18 months.

* Some of the information in the original thread is inaccurate/obsolete. I have had USD and RMB savings accounts at BOC for some time. There is no limit on deposits, withdrawals, etc.

Edit to change 12 to 18 months. Edit to change thread title.

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@Witold --

I don't think that China's inflation rate has any direct bearing on gain or loss from this investment. As dis... (more)

tuphat (Feb. 02, 2012 @ 7:33a) |

Got today's buy rate - down to 6.2408. Should have bought last week!

daveland (Feb. 03, 2012 @ 2:00p) |

Bank of China is again offering high-rate RMB CDs. The one-year CD yields 2.50% APY. The promotion is from 4/16/2012 t... (more)

bluechalk (Apr. 20, 2012 @ 4:03p) |

Yuan Band Widens, Yuan Bet Unwinds .
By TOM ORLIK

China's government has banged another nail in the coffin of hopes for rapid yuan appreciation.

On Saturday morning the People's Bank of China announced that the yuan's trading band against the dollar would be widened to 1% from 0.5% previously. That means the exchange rate can move farther from the level set daily by the government, before the central bank wades into the markets to bring it back into line.

It shows that Beijing is confident the yuan is approaching equilibrium level—and with some reason. China's trade surplus fell close to zero in the first quarter of the year and the International Monetary Fund is poised to sharply lower its forecast of the country's long-term current-account surplus.

The end of expectations of yuan appreciation has far-reaching implications. Investments in the burgeoning offshore yuan bond market, Asian currencies that track the yuan, and the mainland companies that make up 55% of Hong Kong's Hang Seng Index, are all also bets on a rising Chinese currency.

Already this year, the yuan has fallen 0.14% against the dollar. A wider trading band means that greater two-way fluctuation is now on the cards. Lower expected gains and higher volatility mean bets on one-way appreciation have lost their appeal.

The People's Bank's decision is also significant for what it says about the direction of China's reform. The government is already talking about liberalizing interest rates. Now it is taking steps to allow the exchange rate too float a little more freely too.

Those shifts chip away at the main supports for China's investment- and export-heavy growth model. They suggest the government is getting serious about rebalancing—in line with its pledge to bring consumption into play as a driver of growth.

In the short term, investors might mourn the end of one of the surest bets in global markets. In the long term, more flexible, market-set exchange rates promise to help put China's economy on a more sustainable growth path.
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So you made 12% or so in the past year? Nice!!

SUCKISSTAPLES said:   So you made 12% or so in the past year? Nice!!

Sorry, the 10% figure was over 18 months (July 2010 to January 2012) rather than 12 months. But obviously still better than most alternatives.

Should have done it earlier, Yuan has appreciated against dollar for more than 30% in past 5 years.

Plus the high interests with Yuan, you could have gained a lot with minimal risks.

Anyone want to do some legwork with the sF Asian banks to see if there's a comparable offering
Out here ? I know Cathay offers it , possibly eAst west bank, bank of the orient etc

I'd do it but don't think
I'm going to get all the details as an Asian customer might

Housing market in China is considered a bubble.
However it is not clear how it will affect RMB if it bursts most likely in a negative way...
USD on the other hand might be in much bigger trouble so maybe best to invest elsewhere also given that RMB is partially tied to USD due to exports.

Any opinions?

I called Cathay Bank. The RMB account rate is terrible. 0.35% for 12 month.
However, they offer an unadvertised 12-month CD in Australian dollar at 5%. Minimum balance requirement is 25k.
Anyone has experience in foreign currency account?

SUCKISSTAPLES said:   Anyone want to do some legwork with the sF Asian banks to see if there's a comparable offering
Out here ? I know Cathay offers it , possibly eAst west bank, bank of the orient etc

I'd do it but don't think
I'm going to get all the details as an Asian customer might

Called Eastwest Bank as well. They currently have a promotion in RMB account:
180 days 2.0%
360 days 2.5%
540 days 2.75%
Minimum $5k, Maximum 45k

The way they do it is they transfer the money to the Eastwest bank in China and your money sits there for the term. When it matures and you request your money, the money will be transferred back to the Eastwest bank in the US. Because the bank in China and the one in the US are considered two entities, your money is NOT FDIC-insured. So there is a very remote chance if the Eastwest bank in China goes belly up (extremely unlikely), you cannot get your money back.

To open the account, you need to bring your passport. Chinese citizens are NOT eligible.

Won't be doing this. Hedging against the USA currency and moving funds into China is not a good idea.

grex23 said:   Won't be doing this. Hedging against the USA currency and moving funds into China is not a good idea.

With all due respect: In the Bank of China deal, all accounts (RMB and USD) are FDIC-insured.

The US gov't has been putting some pressure on China to allow their Yuan to increase in value per market forces. The Chinese have 'artifically' supressed the Yuan's value in order to keep their export products artifically cheap. Recently, they have allowed their currency to increase in value a little but not as much as free market forces would dictate.

Bottom line is that the Chinese Yuan will most likely increase in value relative to the US dollar over the long term.

FDIC insured, but not currency insured.

People have played the currency game for decades. Sometimes it works out sometimes it doesn't but long term those Yuan accounts are going in the opposite direction. USD accounts shouldn't be subject to currency fluctuation risks. However the link posted mentions nothing about USD accounts. It in fact says for those rates there is currency fluctuation risks which is correct.

The US gov't has been putting some pressure on China to allow their Yuan to increase in value per market forces.

Yes till 2012 when the government changes hands. This is temporary and done under this existing leadership we have now.

Tuphat seems to want to convince takers so could he be Chinese or working on behalf of this bank?

Can't say or know but I can tell you I wouldn't be moving funds here. Everyone is entitled to their own opinion.

Can do a lot better with other investments.

A good deal is a good deal. I don't think it has anything to do with one's nationality.
I, for one, am Chinese and half of my savings are sitting in banks in China, enjoying 5% interest tax free.
Of course, one should only make investment that he/she feels comfortable about.

grex23 said:   
Tuphat seems to want to convince takers so could he be Chinese or working on behalf of this bank?

Can't say or know but I can tell you I wouldn't be moving funds here. Everyone is entitled to their own opinion.

This isn't a good deal. At least not for me. If its a good deal for someone else and they believe the risk will work their way that is fine.

I'm only interested in FDIC insured account , the Only risk I'm
Prepared to take is the exchange rate fluctuation, which I think will continue to be favorable for a while

emilymm said:   Called Eastwest Bank as well. They currently have a promotion in RMB account:
180 days 2.0%
360 days 2.5%
540 days 2.75%
Minimum $5k, Maximum 45k

The way they do it is they transfer the money to the Eastwest bank in China and your money sits there for the term. When it matures and you request your money, the money will be transferred back to the Eastwest bank in the US. Because the bank in China and the one in the US are considered two entities, your money is NOT FDIC-insured. So there is a very remote chance if the Eastwest bank in China goes belly up (extremely unlikely), you cannot get your money back.

To open the account, you need to bring your passport. Chinese citizens are NOT eligible.


would this page apply to what's mentioned above? http://www.eastwestbank.com/english/CHNRMB-CD-Apr10.asp (I didn't get the "issue date" stuff, but it mentions FDIC insured... )

emilymm said:   
I, for one, am Chinese and half of my savings are sitting in banks in China, enjoying 5% interest tax free.


How is your interest tax free? It this type of interest exempt from us taxes?

VivYip said:   emilymm said:   Called Eastwest Bank as well. They currently have a promotion in RMB account:
180 days 2.0%
360 days 2.5%
540 days 2.75%
Minimum $5k, Maximum 45k

The way they do it is they transfer the money to the Eastwest bank in China and your money sits there for the term. When it matures and you request your money, the money will be transferred back to the Eastwest bank in the US. Because the bank in China and the one in the US are considered two entities, your money is NOT FDIC-insured. So there is a very remote chance if the Eastwest bank in China goes belly up (extremely unlikely), you cannot get your money back.

To open the account, you need to bring your passport. Chinese citizens are NOT eligible.


would this page apply to what's mentioned above? http://www.eastwestbank.com/english/CHNRMB-CD-Apr10.asp (I didn't get the "issue date" stuff, but it mentions FDIC insured... )

No that's a completely different product , a market rate cd where your principal stays demoninated in usd, is guaranteed not to lose any principal, and the rate paid is an average of any exchange rate gains . So the actual interest rate is not known. But you are guaranteed not to lose $1 of principal no matter what the currencies do.

The cny based deposit CDs pay a guaranteed interest rate but subject your principal deposit to currency risk, so it could actually be worth less than when you start (though the trend is for it to be worth more , so you have the potential to earn interest as well as foreign exchange gains)

I opened the account physically in China, not just putting money in a Chinese branch in the US.
For the tax exempt, don't ask, don't tell.

propcgamer said:   emilymm said:   
I, for one, am Chinese and half of my savings are sitting in banks in China, enjoying 5% interest tax free.


How is your interest tax free? It this type of interest exempt from us taxes?

SIS beats me to it. They are different products. The product I mentioned, I had to call the branch and spoke Chinese to find out.

SUCKISSTAPLES said:   VivYip said:   emilymm said:   Called Eastwest Bank as well. They currently have a promotion in RMB account:
180 days 2.0%
360 days 2.5%
540 days 2.75%
Minimum $5k, Maximum 45k

The way they do it is they transfer the money to the Eastwest bank in China and your money sits there for the term. When it matures and you request your money, the money will be transferred back to the Eastwest bank in the US. Because the bank in China and the one in the US are considered two entities, your money is NOT FDIC-insured. So there is a very remote chance if the Eastwest bank in China goes belly up (extremely unlikely), you cannot get your money back.

To open the account, you need to bring your passport. Chinese citizens are NOT eligible.


would this page apply to what's mentioned above? http://www.eastwestbank.com/english/CHNRMB-CD-Apr10.asp (I didn't get the "issue date" stuff, but it mentions FDIC insured... )

No that's a completely different product , a market rate cd where your principal stays demoninated in usd, is guaranteed not to lose any principal, and the rate paid is an average of any exchange rate gains . So the actual interest rate is not known. But you are guaranteed not to lose $1 of principal no matter what the currencies do.

The cny based deposit CDs pay a guaranteed interest rate but subject your principal deposit to currency risk, so it could actually be worth less than when you start (though the trend is for it to be worth more , so you have the potential to earn interest as well as foreign exchange gains)

Would doing this trigger a TDF 90-22.1 filing?

Note recent trends: there is currently an asset bubble, economic growth has been low lately, and the BOT has become more even than was the case for the past few years. First point would indicate that there is a real risk of banks going kaput, but the govt would probably prevent that somehow. Their inflation rate has eased too. There is talk that the pressure to appreciate the currency has lessened, or it may even be reversed. So short term, I would say that there's more adverse forex risk than the past few years.


emilymm: Mind sharing?

grex23 said:   This isn't a good deal. At least not for me. If its a good deal for someone else and they believe the risk will work their way that is fine.

yeah. is it worth it for that 2% with your 5 digits balance?
if i going to gamble, i gamble on stock markets!

grex23 said:   

Tuphat seems to want to convince takers so could he be Chinese or working on behalf of this bank?



FWIW -- I am not Chinese (not there there's anything wrong with that) and I am most definitely NOT working with or for the Bank of China. As you said, everyone is entitled to their own opinions, but for me, the bottom line is (i) the CD and savings accounts are FDIC-insured, and (ii) there is very little unfavorable USD-RMB exchange rate risk over the next 12 months.

P.S. The BOC NY branches (midtown and Chinatown) are real, physical branches with teller lines, CSRs, etc., serving primarily the Chinese and Chinese-American community. I have only been to the midtown branch (Madison at 48th), but I can tell you that all the staff with whom I have dealt are bi-lingual* and very professional. Also, the branch itself is very old-school architecturally -- triple-height ceilings, chandeliers, etc. Quite a contrast to the modern BofA or Chase branch.

* Having chased CD rates all around the country, the staff at BOC speak English better than many of the CSRs of American banks with whom I have spoken.

One could possibly buy CNY options to hedge the risk. Wonder what that would do to the effective interest rate.

sunspotzsz said:   Should have done it earlier, Yuan has appreciated against dollar for more than 30% in past 5 years.

Plus the high interests with Yuan, you could have gained a lot with minimal risks.


Agreed, should have done this earlier. US banks gave only .5% or so, while banks in China gave much higher. That was why I started this thread 20 months ago:

http://www.fatwallet.com/forums/arcmessageview.php?catid=52&thre...

Perfect timing to see this as I'm hot to do a CD here (and live here, so it's easy to go in person). But I'm curious how the RMB account works in terms of currency exchange. Who that has done this can share what transaction fees play into this on both sides (i.e. what does the bank take on the conversion both to AND from RMB?) If it's anything like currency exchange at a US bank, it would seem to kill the deal - but given that you guys are doing it, I assume (hope?) the fees are slim to none?

C4me said:   Housing market in China is considered a bubble.
However it is not clear how it will affect RMB if it bursts most likely in a negative way...
USD on the other hand might be in much bigger trouble so maybe best to invest elsewhere also given that RMB is partially tied to USD due to exports.

Any opinions?



Housing is in a overpriced, but I am not sure if it is a bubble. Even if it is a bubble, it won't affect banking system same way as US housing bubble did, but in China, houses are typically bought with cash or with very high down pay, like 50%. Plus, China still has a low urbanization rate and a lot of people will continue to move to the cities, which creates big demand for housing.

daveland said:   Perfect timing to see this as I'm hot to do a CD here (and live here, so it's easy to go in person). But I'm curious how the RMB account works in terms of currency exchange. Who that has done this can share what transaction fees play into this on both sides (i.e. what does the bank take on the conversion both to AND from RMB?) If it's anything like currency exchange at a US bank, it would seem to kill the deal - but given that you guys are doing it, I assume (hope?) the fees are slim to none?

I have RMB and USD savings accounts at BOC-NY. The last time I did a USD to RMB transfer was on 4/18/11 and received a 6.452 rate, with no transaction fees. Bloomberg spot rate close on same day was 6.538. BOC-NY website indicates you can call for current exchange rate used on transactions. I think (but do not know) they use the official exchange rate set by China.

emilymm said:   I opened the account physically in China, not just putting money in a Chinese branch in the US.
For the tax exempt, don't ask, don't tell.

propcgamer said:   emilymm said:   
I, for one, am Chinese and half of my savings are sitting in banks in China, enjoying 5% interest tax free.


How is your interest tax free? It this type of interest exempt from us taxes?


In other words, it's NOT tax-exempt, you're just evading US taxes.

Considering this... Anyone know what the bid/ask spread is on converting USD in and out of the account?

RadagastMOD said:   Considering this... Anyone know what the bid/ask spread is on converting USD in and out of the account?

Read up two posts

tuphat said:   daveland said:   Perfect timing to see this as I'm hot to do a CD here (and live here, so it's easy to go in person). But I'm curious how the RMB account works in terms of currency exchange. Who that has done this can share what transaction fees play into this on both sides (i.e. what does the bank take on the conversion both to AND from RMB?) If it's anything like currency exchange at a US bank, it would seem to kill the deal - but given that you guys are doing it, I assume (hope?) the fees are slim to none?

I have RMB and USD savings accounts at BOC-NY. The last time I did a USD to RMB transfer was on 4/18/11 and received a 6.452 rate, with no transaction fees. Bloomberg spot rate close on same day was 6.538. BOC-NY website indicates you can call for current exchange rate used on transactions. I think (but do not know) they use the official exchange rate set by China.


Am I doing the math on this correctly? Because I'm getting that as nearly 1% each way - which would reduce the interest on a 1 yr CD to around half a percent??

I would say that any money deposited in one of the 4 state-owned banks (Bank of China being one of them) is very very safe, whether it is FDIC-insured here or not. There is just absolutely no way that the government will let one of these banks default.

East West Bank, on the other hand, is not state-owned. So it is not as safe as BOC. I will go to their branch today and find out more about transaction fee and currency exchange rate.

daveland said:   Am I doing the math on this correctly? Because I'm getting that as nearly 1% each way - which would reduce the interest on a 1 yr CD to around half a percent??

I don't think you are framing the problem correctly. First, as an individual, you simply are not going to get the spot rate on any currency without some transaction cost. Second, you are not (presumably) going to spend the RMB, it will simply be store of value for you for the duration. Finally, and you can chose to believe this or not, the likelihood of RMB depreciating vs. USD for next 12 months is extremely remote.

So, let's say you put USD 100,000 into RMB 12 mo. CD at today's BOC exchange rate of 6.252 (I called). Assume further that exchange rate does not change over next 12 months. Assuming simple interest at 2.58%:

USD100,000 X 6.252 = CNY625,200 X 1.0258 = CNY641,330 / 6.252 = USD102,580 .

SO you get your 2.58% return if exchange rate flat lines. You get more if RMB appreciates (likely). You get less if it depreciates (unlikely).

tuphat said:   daveland said:   Am I doing the math on this correctly? Because I'm getting that as nearly 1% each way - which would reduce the interest on a 1 yr CD to around half a percent??

I don't think you are framing the problem correctly. First, as an individual, you simply are not going to get the spot rate on any currency without some transaction cost. Second, you are not (presumably) going to spend the RMB, it will simply be store of value for you for the duration. Finally, and you can chose to believe this or not, the likelihood of RMB depreciating vs. USD for next 12 months is extremely remote.

So, let's say you put USD 100,000 into RMB 12 mo. CD at today's BOC exchange rate of 6.252 (I called). Assume further that exchange rate does not change over next 12 months. Assuming simple interest at 2.58%:

USD100,000 X 6.252 = CNY625,200 X 1.0258 = CNY641,330 / 6.252 = USD102,580 .

SO you get your 2.58% return if exchange rate flat lines. You get more if RMB appreciates (likely). You get less if it depreciates (unlikely).

This really depends on the exchange rate spread. On any given day, the buy rate and sell rate offered by a bank to its retail customers will be different. This spread will eat-into your total return. IOW, assuming exchange rates a flat throughout your investment period, you will not get a conversion of 6.252 CNY = 1USD when you redeem the CD at maturity. It is good to know what the spread is --- 1% spread is not unusual for retail customers --- could be worse.

It is true that you will not get wholesale/spot rate. But you will get somewhat worse rates on both sides of the trade (when you convert USD-CNY and back) and they both cut into your net return.

Edit to say: I don't know if BOC-NY has different rates for USD to RMB account transfers, than for RMB to USD account transfers.

tuphat said:   Edit to say: I don't know if BOC-NY has different rates for USD to RMB account transfers, than for RMB to USD account transfers.
I dont know either. But this is true for virtually every currency transfer that I have seen.
ETA: May be emilymm will update us after she checks with the bank.

cestmoi123 said:   emilymm said:   I opened the account physically in China, not just putting money in a Chinese branch in the US.
For the tax exempt, don't ask, don't tell.

propcgamer said:   emilymm said:   
I, for one, am Chinese and half of my savings are sitting in banks in China, enjoying 5% interest tax free.


How is your interest tax free? It this type of interest exempt from us taxes?


In other words, it's NOT tax-exempt, you're just evading US taxes.


wait till FATCA kicks-in in 2014.

Skipping 26 Messages...
Bank of China is again offering high-rate RMB CDs. The one-year CD yields 2.50% APY. The promotion is from 4/16/2012 to 5/25/2012. More information can be found here.



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