Recent social media posts have been widely circulating advertisements for US dollar time deposits with rates purportedly above 5%.
Are such high rates for US dollar deposits still available? It has been noted that some foreign banks have recently launched limited-time promotions for high-interest US dollar deposits, yet even these do not reach the 5% mark. Furthermore, upon checking the Bank of China (Hong Kong) App, the highest available US dollar deposit rate is currently 3.3% for a very short 3-month term. There is also a promotional 7-day special foreign currency and RMB conversion deposit campaign advertising a rate of up to 15%, but this is a short-term promotional offer with specific conditions, not a standard deposit rate.
Since the Federal Reserve began its interest rate cutting cycle, US dollar deposit rates have been declining steadily. What is the reality behind the online claims of deposits over 5%? Are actual US dollar deposit rates still attractive? What are the risks involved? A reporter conducted in-person interviews with several banks to investigate.
Posts with slogans like "US dollar deposit at 4.75%, worth selling everything to invest" and "US dollar deposit at 5.56%" have proliferated on social media recently. These posts feature very similar titles and content, using high yields to attract potential clients.
In reality, since market expectations in 2024 pointed to the Fed starting a rate-cutting cycle, domestic US dollar deposit rates have fallen continuously from their peak above 5%. Currently, one-year large-denomination US dollar deposit rates generally hover around 3%. Some city commercial banks may offer slightly higher rates for exclusive large-amount tiers, but these have significantly contracted from previous highs and rarely reach the over 5% rates claimed on social media.
So, what exactly are the high-yield deposits mentioned in these promotional posts?
After adding a contact, an industry insider who had advertised high-yield US dollar deposits clarified, "This product is a Hong Kong insurance policy, offering guaranteed principal and interest." Another professional described a product as "a 5-year savings plan with a guaranteed simple interest rate of 4.57%," which was also a savings and dividend insurance product, not a traditional bank time deposit. In fact, such Hong Kong savings dividend insurance only guarantees a portion of the returns, with non-guaranteed dividend yields.
What, then, are the actual US dollar time deposit rates?
It has been observed that since July, some foreign banks have launched limited-time high-interest US dollar deposit campaigns targeting new customers, generally raising rates across various terms, with some products offering annualized rates up to 4%.
For example, on July 15th, The Bank of East Asia promoted a US dollar deposit preferential rate campaign via its WeChat official account. During the promotion period, new customers depositing between $10,000 and $50,000 (exclusive) could enjoy promotional rates of 3.4% for 3 months, 3.35% for 6 months, and 3.2% for 1 year. For deposits of $50,000 or more, the rates were 3.4% for 3 months, 3.55% for 6 months, and 3.25% for 1 year.
Similarly, Hang Seng Bank launched a limited-time US dollar deposit promotion from July 1st to 31st, available to all customers for new funds. Specifically, a 1-month US dollar deposit could yield an annualized rate of 4%, while 3-month and 6-month deposits offered 3.65%, with a minimum deposit of $20,000. A relationship manager noted that the bank had recently increased its dollar deposit rates, as previous promotional rates for 3-month and 6-month deposits for new funds were 3.2%.
Additionally, via the Bank of China (Hong Kong) App, 3-month US dollar deposit rates were seen at 3.3%, and 6-month rates at 3.1%. ZA Bank offered a maximum US dollar deposit rate of 3.11% for a 4-month term.
On July 22nd, a reporter visited 10 banks in East China, including 7 domestic banks (state-owned, joint-stock, city commercial, and rural commercial banks) and 3 foreign banks.
The visits revealed that none of the 10 banks offered US dollar deposit products with rates exceeding 5%. Market-leading US dollar deposit rates were concentrated around 3%. Foreign banks generally offered higher rates, but the maximum was only around 4%. Furthermore, staff at several banks simultaneously cautioned that significant foreign exchange rate volatility poses considerable exchange rate risk for customers who purchase foreign currency specifically to make a deposit.
State-owned and most joint-stock banks offered US dollar deposit rates generally below 3%. A staff member at Shanghai Pudong Development Bank stated the bank had not raised its US dollar deposit rates, with 1-year and 2-year rates stable at 2.8% for deposits starting at $5,000. Agricultural Bank of China also offered rates below 3%: 2.8% for a 1-year deposit with a $5,000 threshold, 2.3% for 3 months, 2.5% for 6 months, and only 1.8% for amounts below $5,000. China Merchants Bank required a $20,000 minimum for its US dollar deposits, with both 1-year and 2-year products offering 2.8%.
Hengfeng Bank offered relatively higher rates. Staff indicated its quoted rates were at a high level, with a 1-year product requiring a $50,000 deposit offering 3.6%, while the 2-year rate was actually lower. "If you pay attention to such products, you'll find a 3.6% rate is relatively high among peers."
City commercial and rural commercial banks offered slightly higher rates than state-owned banks, with some products exceeding 3%. Shanghai Rural Commercial Bank staff quoted a rate of 3.1% for a 13-month deposit with a $5,000 minimum. For longer terms, a 21-month product offered 3.2%, which could increase to 3.4% if the deposit reached a $200,000 threshold.
China Minsheng Bank offered a 1-year US dollar deposit rate of 3.1% with a $5,000 minimum. Staff noted that products offering over 4% were very scarce in the current market, with the vast majority offering rates just above 3%. Bank of Jiangsu also required a $5,000 minimum, offering 3% for 1 year, 2.7% for 6 months, and 2.5% for 3 months.
Xiamen International Bank offered the same rate of 3.4% for both 6-month and 1-year US dollar deposits for new customers, with a $2,000 minimum. "Our bank's US dollar deposit rates were highest last year, around 5.4%. After coming down, they haven't been raised again. We are among the banks with relatively high rates in the market."
Additionally, Fubon Bank (China) implemented a special rate for currency exchange. Mainland customers exchanging currency at the bank could then deposit it, with a 6-month deposit (minimum $10,000) offering 3.8%, while the 1-year rate was only 3.55%, showing an "inversion" where short-term rates were higher than long-term. Staff explained this was because the market lacks a consensus on the timing and pace of future Fed rate cuts, leading financial institutions to be reluctant to offer long-term, high-interest US dollar deposits.
Foreign banks offered higher overall US dollar deposit rates, with several short-term products exceeding 4%. HSBC launched a limited-time US dollar deposit promotion where a 3-month product for deposits between $2,000 and $80,000 (inclusive) could yield 4.1%. Staff noted that longer-term products of the same type were not part of this promotion; for those, the minimum deposit increased to $30,000 with a rate of only 2.8%.
Hang Seng Bank also offered a product with a rate as high as 4%. Staff detailed rates of 4.0% for 1 month, 3.65% for both 3 and 6 months, and 3.68% for 12 months, all requiring a $20,000 minimum deposit.
Beyond rates, multiple staff members warned that customers specifically exchanging currency to make a deposit must be wary of potential losses from exchange rate fluctuations. The aforementioned Xiamen International Bank staff member advised, "Although the US dollar exchange rate is currently at a low level, if you are considering exchanging currency, you still need to pay attention to whether the interest rate can cover potential exchange rate losses. If the drop is severe, even a 5% interest rate might not cover it."
Since market expectations in 2024 pointed to the Fed starting a rate-cutting cycle, domestic US dollar deposit rates have fallen continuously from their peak above 5%. However, since July 2024, some foreign banks have launched limited-time high-interest US dollar deposit promotions, generally raising rates across terms, with some products reaching 4%.
How should the decline in US dollar deposit rates be viewed?
"The continuous decline in US dollar time deposit rates is an inevitable result of the Federal Reserve's rate-cutting cycle. Currently, mainstream banks' 1-year US dollar deposit rates are generally in the range of 2.8% to 3%," said an expert. He noted that foreign banks' temporary rate hikes ahead of the late-July FOMC meeting were essentially short-term measures to alleviate their own US dollar liquidity pressure and attract foreign currency deposits, not a reversal of the interest rate trend.
So, do US dollar deposits still have an advantage compared to RMB deposits? Are there risks in purchasing US dollar time deposits?
The expert stated, "From a horizontal comparison, US dollar deposits still maintain a certain interest rate advantage over RMB deposits. Currently, mainstream one-year RMB time deposit listed rates at domestic commercial banks have fallen below 1%, while foreign banks' short-term US dollar deposit annualized rates can still reach 3.4% to 4%, representing a considerable interest rate differential."
However, the expert also pointed out that this "paper advantage" must be considered net of currency exchange costs. If the RMB appreciates periodically, exchange rate losses could erode or even completely offset the interest income.
Regarding the risks of purchasing US dollar time deposits, the expert highlighted exchange rate risk and liquidity risk. He explained, "First, exchange rate risk: RMB appreciation will lead to a shrinkage in actual returns when converting back to RMB. Second, liquidity risk: if funds are withdrawn early during the fixed deposit lock-in period, they are typically only subject to a demand deposit interest rate, significantly reducing returns and limiting fund flexibility." He recommended that investors with actual foreign currency usage needs allocate accordingly, but the proportion of US dollar assets in total personal assets should be kept within a reasonable range, prioritizing 3 to 6-month short-term products to facilitate timely adjustments based on interest rate and exchange rate changes.
Comments