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Renminbi (RMB) related products and services is currently a hot topic, with more emphasis being placed on it. More banks have now jumped on the bandwagon of RMB related products and services, especially in the area of Deposits. Bank of China supports fair dealing and append below are some useful information you may wish to consider in facilitating your decision-making with respect to RMB related products and services.
Consideration 1: Exchange Rates
For RMB deposits placement, you would need to exchange your currencies of deposit, for example Singapore Dollars (SGD) or U.S. Dollars (USD) into RMB. With the conversion, exchange rates will come into play. Please note that exchange rates may vary from time to time. Append below are some examples for illustration purpose:
| Bank |
Exchange Rate （SGD to RMB）on 10th Jan 2011 |
| A |
SGD 1.00 = RMB 5.068 |
| B |
SGD 1.00 = RMB 5.020 |
In this instance, the exchange rate from Bank A is comparatively better than Bank B.
Consideration 2: Interest Rates
Interest rates play a crucial role in your return on investment. Interest rates offered by one institution may vary from another.
Append below is an example for RMB500,000 6-month time deposit placement:
| Bank |
Interest rate p.a. - % on 10th Jan 2011 |
| A |
0.45% |
| B |
1.18% |
In this instance, the interest rate from Bank B is comparatively better than Bank A.
Consideration 3: Overall Return on Investment
Let’s now consider the overall return on investment (principal + interest) for a 6-month RMB time deposit with a placement amount of SGD100,000 equivalent.
Illustration :
Principal + Interest from Bank A: SGD100,000 x 5.068 x [1+ (0.45% / 2)] = RMB507,940.30
Principal + Interest from Bank B: SGD100,000 x 5.020 x [1+ (1.18% / 2)] = RMB504,961.80
Based on the above illustration, though Bank B offers a higher interest rate, its exchange rate is less favourable [see Consideration 1]. Thus overall, investment in Bank A offers a higher overall return than Bank B by as much as RMB2,978.50.
Consideration 4: Your purpose for RMB Deposits
Should you be using your RMB deposits for overseas’ spending, it is advisable that you take into consideration BOTH exchange rates and interest rates to reap the highest return on investment. (As illustrated above) However, should you be using your RMB deposits for long-term investment purpose, it is advisable to consider a bank that offers the most comprehensive RMB related products and services with reasonable rates. This will enable you to reap the most apart from RMB deposits and to reduce any currency conversion risk.
Bank of China Limited being the pioneer bank in Singapore to roll out RMB related products and services, we offer RMB Remittance , Cash Withdrawal, Exchange and Renminbi Structured Products apart from Deposits. These provide you with more options and to tap on various investment opportunities.
Consideration 5: Fund Withdrawal Restriction
We recommend that you should check with your respective bank if there is any RMB withdrawal restrictions imposed upon maturity of your time deposit. For example, whether you have to withdraw your deposits in non-RMB denomination, e.g. in SGD or USD upon maturity of your time deposit. Thus, it would be advisable for you to consider banks with more comprehensive RMB related products and services to reduce such occurrence.
Consideration 6: Other Factors
We would wish to highlight to you that RMB is not a freely convertible currency and subject to regulation changes initiated by China and/or local authorities. Apart from exchange rates fluctuation risk, you would also be exposed to liquidity risk. We would recommend that you choose a deposit tenor suitable to your needs with a reputable bank that offers the most comprehensive RMB related products and services. The bank should ideally be well-versed in China’s banking policy and has in-depth knowledge of RMB related products and services to assist you in making your investment.
Please note that the above is for general information purposes only. Its contents are not intended to be legal or professional advice and are not a substitute for specific advice relating to particular circumstances. Bank of China Limited does not accept responsibility for any loss or damage arising from any reliance on the contents of this information. Should there be any discrepancy or inconsistency in interpretation between the English version & the Chinese version, the English version shall prevail.
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