In a period when China’s booming economy is transforming the global markets, the Bank of China has decided to offer a unique investment opportunity for customers in the United States. Now, accounts at Bank of China allow American customers to invest in China’s yuan, or renminbi (RMB).
China has been known to have a tight leash on its currency, even more so as the world’s second largest economic power is aggressively trying to thwart risks of inflation.
Through prudent monetary policy, the central bank of China is keeping interest rates relatively low to maintain its position as a dominant exporting nation.
As a result, the current value of the Chinese currency is largely downplayed from the true value that is consistent with China’s economic growth. Because China is expected to eventually raise interest rates and boost the value of its currency, Bank of China’s new offer to invest U.S. dollars for Chinese yuan presents a currency investment opportunity outside of the foreign exchange trading markets.
Investing in the Yuan Through Bank of China
For prospective customers, Bank of China’s RMB accounts offers diversification of investment portfolios by adding holdings in foreign currency. Bank of China operates two branches in New York City and one branch in Los Angeles and accounts must be opened in person.
American customers can invest up to $4,000 per day and a total of $20,000 per year, which will be converted to yuan upon deposit. The RMB accounts are available as savings accounts and certificates of deposit (CDs) in 6-month and 1-year terms. The minimum required balance is $500 for the RMB savings account and $1,000 for the RMB CDs.
Additionally, accounts at the Bank of China branches in New York are FDIC-insured – customers won’t lose their deposits if the bank happens to fail. The Los Angeles branch does not have this safeguard.
Customers are still susceptible to currency risks. Although many economists are confident that China will eventually increase interest rates and accurately value the yuan, RMB account holders at Bank of China can lose money if the Chinese currency drops in value.