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Open a Yuan Bank Account in New York or Los Angeles

This article was written by in Banking. 26 comments.


If you visit the Bank of China’s branches in New York or Los Angeles and bring two forms of identification and your cash, you have the opportunity to open a savings or money market account denominated in yuan (renminbi), the currency of China. The interest rate you’ll earn is low, but that would not be the main purpose of opening this account.

Holding an account in yuan will expose you to the booming Chinese economy without the risk of playing in the foreign exchange trading market. If China relaxes its hold on the value of its currency, chances are it will increase — perhaps gradually, perhaps quickly. Not only that, but the accounts at the New York branches of the Bank of China are FDIC insured, so you won’t lose your money if the bank fails. That doesn’t protect you from losing money if the value of the currency decreases.

Don’t look at this as a get-rich-quick scheme. It might make sense to hedge your net worth with foreign currency, particularly when the U.S. dollar is falling out of favor with the rest of the world. A reader emailed me earlier today to ask what I thought about this. At first it seemed risky, but the more I think about it, I think it may be a smart move to get started with holdings in yuan, without sacrificing too much of my liquid investments.

Here are some of the drawbacks.

  • Opening the account is more work than what we’ve grown accustomed to. If you live in New York City or Los Angeles, you can get to the branch to open your account easily, but others will have to travel. Currently, there is no way to open an account online.
  • A global war between nations, resulting from the shift of economic power, might put investors in a difficult situation. After World War I, many wealthy Americans invested in the rebuilding of the German economy. Following the money, this capital helped finance Germany’s leaders in World War II. As China becomes closer to being the nation with the most economic power globally, will the United States push back to maintain its position?
  • China is accused of human rights violations and this leads many concerned Americans not to consider doing business or investing with the country. This is a difficult stance, since many of America’s favorite brands are entwined internationally, including relationships with Chinese businesses. Nevertheless, some may want to avoid doing more to actively help the Chinese economy.

Here is information on opening the savings account at the Bank of China. You can bring a minimum of $500 and exchange the cash for yuan at the bank. The bank will deposit the yuan. For a certificate of deposit, you’ll need at minimum the equivalent of $1,000. Would you consider opening a bank account based in yuan (RMB)?

Updated January 20, 2011 and originally published January 19, 2011. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about Luke Landes and follow him on Twitter. View all articles by .

{ 26 comments… read them below or add one }

avatar Squirrelers

I would not.

This comes from someone who has traveled to China a number of years ago on a student exchange program. Coming from the midwest and then visiting China for nearly 4 weeks with other students was an amazing experience that opened my eyes to the world in many ways. We saw and experienced some remarkable things there as visitors.

That said, Im not inclined to make such a direct investment as this. Im concerned about their growing prominence in the world economic stage and what that means for those of us here at home. That, plus the problems you mention above with human rights are additional reasons to steer clear. Some mutual fund exposure will be there and that’s ok with me, but direct investment is not something I wish to do.

By the way, China owns a ton of US debt these days.

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avatar gotr31 ♦224 (Cent)

I have to agree.The human rights violations alone are reason enough for me to steer clear of any direct investment.

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avatar Yana ♦218 (Cent)

Great article, Flexo. Informative and clear. I’m looking forward to input from others, as well.

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avatar Matt SF

Call me wussy anti-risk kinda guy, but wouldn’t a foreign currency CD from Everbank.com make a little more sense? A chance at capturing some of the upside, no risk to principal, and no trip to NY or LA?

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avatar Luke Landes ♦127,550 (Platinum)

I checked EverBank when I first heard about the Bank of China offering. EverBank doesn’t offer CDs in RMB. If you’re looking for other countries that might see some upside due to economic development, they might have some choices, but if you’re looking specifically for China, it’s not available at EverBank.

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avatar Matt SF

My bad Flexo. I saw the Chinese renminbi listed on some time ago at Everbank, and assumed it was available as a CD. Upon closer inspection, it looks as if it’s only offered in something called a “Access Deposit”, or similar to a money market account.

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avatar Luke Landes ♦127,550 (Platinum)

Interesting! They do have a renmibi deposit account. I don’t remember seeing that. That is similar enough to the Bank of China offering, only with a higher minimum deposit of $10,000 equivalent for RMB. Their other currencies have a minimum deposit of $7,500.

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avatar Yana ♦218 (Cent)

There’s a mention of this at Schwab – under the heading “US dollar largely influenced by the euro”

link

Having to make a trip to New York will keep me from doing this. If it could be done online, I would consider this on a small scale.

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avatar skylog ♦368 (Nickel)

all “drawback” issues aside, this is very interesting; however, the need for a trip to new york or los angeles would kill it for me. also, i am unsure how much of an “investment” would make it worthwhile.

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avatar eric ♦1,549 (Half-Dollar)

I find this quite interesting. It’s not something I plan on doing any time soon but it’s worth following up on.

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avatar Bobka ♦13 (Newbie)

Like Squirrelers, I too have traveled to China and observed some remarkable progress. However, China also has some massive internal problems that go well beyond human rights issues. Some of the most obvious include having too many males in the population due to the one child policy, having massive industrial pollution that will have to be cleaned up someday, having way too many farmers, and having a lack of university trained professionals due to their demise during the Cultural Revolution. Many of China’s freeways, skyscrapers, nuclear plants, and modern airports were designed by outside professionals paid for with US dollars and built with inexpensive local materials and labor. At this point, to pay for these and other outside goods and services, the Chinese still need dollars more than yuan. And they are willing to do whatever is necessary to get those dollars, too, including keeping the RMB cheap, charging as much as they possibly can for Visas for US visitors, and borrowing the rest in the form of US Treasury investments.
It seems to me that the only reason to hold Chinese currency (either at the Bank of China or under the mattress) would be to expect some future gain relative to the US dollar. Until internal Chinese conditions change, that gain won’t happen, and the wait for that to occur may be quite long.

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avatar brilliant

Bobka that last paragraph is the exact reason we are seriously considering this. Morality aside, just looking at making a good return on investment, I heard some crazy quote on the radio that the value of the yuan might actually increase by 100% over a relatively short period of time (let’s say it only increases by 25%), compared to a long term CD that certainly beats any of our interest rates here.

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avatar tbork84 ♦1,867 (Half-Dollar)

Now would this be an FDIC insured savings account?

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avatar rewards ♦31 (Newbie)

i’d rather buy some FXI shares

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avatar TakeitEZ ♦549 (Dime)

This is a very interesting post. I live in the northern Jersey about 25 minutes from Manhattan so making a deposit would be no problem. You gave me something to think about, Flexo. It might be worth the risk for possible future gain.

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avatar jim

From their website:
“Los Angeles Branch is a limited branch which is NOT FDIC-insured.”

I would not put money into a bank that is not FDIC insured.

Personally I wouldn’t speculate on foreign currency either.

China controls their currency so there is no guarantee you’ll get any increase in Yuan v US dollars. It is not tied directly to the growth of China GDP. They’ve continually resisted pressure to let their currency rise. If they do let their currency go up it will hurt their export driven economy and curtail their growth. I wouldn’t bet on their money.

Anyone else find it puzzling that Americans think buying Yuan is a good idea while at the same time the Chinese keep buying more US treasuries?

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avatar Investor Junkie

“China controls their currency”. This is generic talking point. By this you are implying the US (and other countries) do not? The US is most definitely manipulating it’s currency.

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avatar Luke Landes ♦127,550 (Platinum)

I wasn’t being very specific. Every country controls its currency and manipulates the market to an extent. The point is China does not allow the RMB’s value against other currencies to fluctuate in the market — controlling its value at the front end rather than influencing its movements at the back end.

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avatar Capitolist Cowboy

To answer your question, I do think it would be a very good idea to invest in the Chinese Yuan and the fact that the Chinese keep buying more U.S. treasuries is exactly why it’s a good idea. The reason China is buying U.S. treasuries is to maintain a trade surplus and continue their disporportionate amount of exports.

However, when you run a surplus like China’s, the risk of a serious inflation problem continues to grow with the sustained amount of exports. Because of other weaknesses in Chinese controls over exchange rates, exports, etc., it is very probable that China’s next big challenge will be trying to curtail runaway inflation rates because of their prolonged surplus and currency manipulation. Historically, countries that have followed this path have had the same problem, but one country’s loss is another investor’s gain and I see great potential in a return on any Yuan investment.

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avatar Jimmy

I totally agree with you!! You are truly a capitalist cowboy. Last 4 month since I follow the Yuan move, it has been increased about 5%, better than any CDs or MM interest rate in any bank of US! It will be a smart choice if you want keep the value of your cash!

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avatar Sigmond Twayne

I believe that China is no longer buying US Treasury Bills
and they are trying to unload U.S. Dollars as fast as possible.

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avatar Yana ♦218 (Cent)

I suspect there will be more talk about this, and in the meantime this article is something to consider as well -

link

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avatar MR ♦295 (Nickel)

Fascinating!

I had no idea that we had access to the Yuan! I might consider putting $1,000 as a pure speculative play. Of course if relations with China worsen, I would pull it out and close the account though.

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avatar Mike

Full disclosure: I have an RMB bank account in Hong Kong (I’m American, and I have declared this account to the US Dept. of Treasury).

I find some of the comments puzzling. First, holding the currency isn’t exactly the same thing as “investing” in China and therefore supporting its economic growth, military buildup, etc. By holding China’s currency, you aren’t, for example giving their military industrial complex capital to work with in any meaningful way. Keep in mind that the Chinese government is massively loaded, and is buying US$ and other currencies in order to keep its own currency undervalued. This means that a) if the Chinese government wants investment capital, it has it already; it just has to redirect its assets from US$ purchases to direct investment. Your little $1000 account is a blip; but b) conversely, for any American who thinks that China’s “currency manipulation” is a problem for the USA, note that China does it by buying US$; and so if you, an American, buy RMB with your US$, then you are directly countering China’s “currency manipulation” (albeit, again, on a tiny, insignificant scale).

For investment purposes, there really isn’t any good reason to hold RMB currency (I hold it only because I go to China sometimes). If you want to invest in a way that benefits from China’s growing economy, you might consider holding HK REITs that charge rent in China, or Australian mineral companies that directly sell to China. (It is quite impossible for China to grow its economy without putting money in the hands of Australian mining companies).

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avatar juslen

If I take 500 USD and exchange it for 3,293 RMB and the US dollar loses value due to inflation, my 500 dollars has now lost purchasing power. So 500 dollars today may only buy 450 dollars worth of goods or services AFTER inflation. The fact is, the United States dollar has lost 95% of its value in the last 100 years. So by converting USD to RMB, you may be hedging against inflation.

If the RMB appreciates in value while the USD depreciates, that 3,293 RMB can now be exchanged for dollars and you end up with with a USD return of more than 500. Lets just say inflation reaches 10%.. that would mean that the value of the dollar would decrease by 10%. So it takes MORE dollars to equal the same amount of value in the RMB. So when I exchanged 500 for 3293 RMB… and the dollar loses value.. that 3293 RMB when converted to dollars will be MORE than 500.

The value of the dollar is still less, but if I would have left that 500 USD sit in the bank at 10% inflation it would really be worth 450 dollars. So now you see how converting USD into RMB can be considered an investment. But it could also be a bad investment because the dollar could appreciate in value while the RMB could lose value. But I’m of the Austrian view of the business cycle.. I see massive inflation in our future and plan on “investing” in RMB if possible.

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avatar Rick McCoy

It’s a investment Worthwhie

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