FDIC-Insured Bank Accounts Holding Chinese Renminbi (CNY) (RMB)

Reader Jonathan wrote in the tell me that the Bank of China (BoC) is offering FDIC-insured bank accounts that are denominated in renminbi, the official currency of China. Also referred to by the primary unit yuan, you may have heard about how China tightly controls this currency in the news. Since many sources view the yuan as being undervalued relative to the dollar due to artificial exchange rates, some people view holding yuan as a good investment. Here’s how the Bank of China news has played out in financial websites.

  • 1/12 – The Financial Times blog BeyondBRICs brings up the ability to open accounts in yuan, but says “No need to rush out and open a renminbi account just yet.” They note that this ability has actually been around since February 2010, but nobody in the media really noticed.
  • 1/12 – The Reuters blog by Felix Salmon picks it up and brings it a step further, pointing out that US officials have said the yuan is overvalued, so that “Chinese revaluation is going to happen at some point, and when it does, you’ll make money”, and “the downside is limited”. More excitement.
  • 1/14 – The Wall Street Journal blog ROI joins the fray, stating (1) It’s very unlikely to go down. (2) It’s very likely to go up. (3) You won’t miss out on a lot of interest elsewhere, as nowhere else is paying a lot of interest. (4) It will diversify your portfolio. (5) It may offer you and your family something of a hedge against the decline of the U.S. economy. Can you feel the buzz?
  • 2/7 – Time Magazine blog Curious Capitalist has another post on the topic a few weeks later. It provides more detail on what this account does not offer: interest, the ability to withdraw yuan, deposit yuan, write checks, or use debit cards. Basically you can speculate on the conversion rate of USD-CNY and that’s it. More below.

So, should you go out and open an account? Well, first you must go in person to a Bank of China branch in New York City, either at Madison & 48th St or in Chinatown. Some of the articles erroneously reported that you can open up an RMB account at the Los Angeles branch. According to the Bank of China website, this is not true. The branch does not offer FDIC-insured accounts, and doesn’t offer personal account of any kind.

The limit a U.S.-based individual customer can exchange is $4,000 a day. From what I have gathered, you open an account and “buy” RMB from Bank of China using your U.S. dollars. Your deposits are FDIC-insured against bank failure, but not losses from currency fluctuations. If you wish to withdraw, you must again exchange your RMB back to USD, leaving you again with dollars. You can’t withdraw any RMB, here or in China. The savings account earns no interest. So any difference will be due to the exchange rate.

According to the Wikipedia entry for Remminbi, academic studies have shown then yuan to be undervalued relative to the dollar using “purchasing power parity analysis”. The Treasury Secretary called it “substantially undervalued” a month ago. Per this article, the rate of 6.5855 CNY to 1 USD set just yesterday (2/16) is a record high, leaving the yuan up 3.6% since last June.

I honestly don’t pay enough attention to currency markets and all the politically-related news to really weight the pros and cons properly. Even if it does seem like the yuan is undervalued right now, but who knows when or how it will be corrected? China sets the exchange rate for the most part, so it could be years or more. During that time, its economy could experience high inflation as well which could make RMB even weaker relative to USD.

I see no sure bet here, just a speculative investment. But if you have a “play money” account capped at 5% of your portfolio like I do at times, this might be one idea that you could drop some bucks on. What do you think?

Update: You can get basically the same thing online at Everbank WorldCurrency Access deposit account. It doesn’t currently earn any interest, and unfortunately there are no interest-bearing CD options available right now either. But it does let you get it renminbi-denominated.


  1. Wouldn’t it be easier to buy the CYB ETF? You could even make some money that way

  2. The risk lies in guessing when the yuan will appreciate. You earn no interest while your USD are in RMB. The purchasing power of a dollar will decline due to inflation. The Chinese government may wait years before allowing significant revaluation. Holding RMB is a decent investment only if you know that a major appreciative event will happen in the next year or two. Otherwise, you are tying up your money, diminishing it through inflation and neglecting a market rate of return.

  3. Actually inflation (in China) is a good thing if you hope to profit from this. Because of the peg the central bank raising of interest rates won’t help but if that fails to cool inflation they may not have a choice but to let the yuan appreciate. It’ll hurt their export business but conversely an appreciating yuan will buy more wheat and oil (and lower prices for those internally). Food affects everybody there. Export business just a significant fraction (and it takes a while to move manufacturing, food inflation is almost immediate).

  4. In your second bullet on the Felix Salmon I think you meant “undervalued” rather than “overvalued.”

    I think this is interesting. It would be much better if we could earn Chinese interest rates on our deposits, but since US accounts are paying low to no interest it may be worth doing. There are a lot of fundamental economic reasons that the RMB should appreciate to reach an equilibrium exchange rate, and clearly the Chinese Central Government has been keeping it artificially weak. U.S. political pressure on the Chinese to allow the currency to strengthen is only going to intensify. In fact, allowing U.S. depositors to hold renminbi is a small step towards more market-oriented currency regime.

  5. I don’t know what the buzz is all about. It has been possible to have a Yuan-denominated noney market account at Everbank for years.

    They don’t pay interest, but they did in the past.

    And unlike the BoC, it can all be done online. No need to walk into any branch anywhere.

  6. @Mark – I was looking for that last night and I couldn’t find it. Thanks for the push, I see now that they have a “WorldCurrency Access Deposit Account” for RMB:


    If I recall, Everbank makes a bit of money on the exchange rates here, but the convenience factor is really good.

  7. I earn no interest? Great! I earn virtually no interest now on my savings and checking accounts. Actually, food and gas inflation is turning my dollars into junk. I think these accounts are a good idea.

  8. Tom's blog says:

    It sounds like a great idea but I thought Citibank was a good buy in 2006.

  9. I think JohnC’s got it right with inflation and the need to raise interest rates as a result leading to a so-called “appreciative event.” This can happen if the Chinese Government does not interfere too much, some level of manipulation already being factored in. I fear also that other artificial means of control may be employed that may not result in yuan appreciation.

  10. I do a lot of transactions with vendors in China. Since 2010, the RMB has appreciated about 3.6%. My vendors project another 2% in 2011, which I feel is on the low side.

  11. Let’s take a moment to remember that the same party responsible for undervaluing the currency (the Chinese government) also owns all Chinese banks, including the Bank of China. Seems like they are making money by undervaluing the currency, and then making more money by selling the undervalued currency before finally changing the value to something appropriate. I’m not an economist or anything, so maybe this isn’t working the way I think it is. Anyway, this is pretty interesting.

  12. As long as interest rates are paltry in the US, you may as well have your money in Yuan.

    Look at the 10 year run:

    “In order to keep the value of the Chinese yuan from appreciating versus the dollar, China’s central bank must buy U.S. dollars in massive quantities. And rather than just sitting on the physical currency – which pays zero interest – it buys foreign securities.”

Speak Your Mind