Leading Russian banks are actively promoting yuan deposits. Rates on them reach 3% per annum. Why do we need deposits in yuan, does it make sense to keep money in Chinese currency and is it a full-fledged alternative to the “toxic” dollar and euro, Izvestia found out.
Raised the stakes
From February 1, several large Russian banks at once raised rates on yuan deposits by 0.5–1 percentage points. According to the website Banki.ru, the rates on deposits in yuan on the market are now in the range of 0.01-2.63% per annum and continue to grow. At the same time, dollar rates are at a near-zero level.
The Chinese currency is gaining popularity for a number of reasons. Firstly, keeping funds in dollars and euros is quite dangerous due to the possible blocking of assets due to sanctions restrictions. Secondly, the role of China as a trade partner of the Russian Federation has increased significantly – the volume of bilateral trade between countries in national currencies has grown sharply. Finally, the Central Bank converted part of Russia’s international reserves into yuan, getting rid of extra dollars and euros.
– Professional market participants, banks, brokers have introduced protective tariffs for deposits in dollars and euros. As a result, individuals and legal entities began to transfer their funds from dollars to Chinese yuan and other currencies of friendly countries. In addition, some banks stopped providing market participants with various currency programs in dollars and euros, replacing them with yuan. So, for example, loans in yuan began to replace loans in dollars and euros, and deposits in dollars and euros began to be replaced with deposits in yuan, – said financial analyst, trader Artem Zvezdin.
Photo: Global Look Press/Xu Jingbo
— Increasing rates on yuan deposits is mainly a marketing ploy by banks in the struggle for funds from clients who want to diversify their investments. On the other side, attracting funds from citizens is a tool for balancing bank lending operations in yuan, the demand for which will depend on the speed of the transition to settlements in yuan and the growth in the volume of transactions of Russian companies with Chinese counterparties, – adds Ekaterina Bezsmertnaya, Dean of the Faculty of Economics and Business of the Financial University under the Government of the Russian Federation.
Despite the growing interest in the Chinese currency, experts do not recommend considering it as the only savings tool. The yield of such deposits is low, the currency of the emerging market itself is quite volatile. In addition, the yuan is not a freely convertible currency. Its rate is set by the People’s Bank of China, which creates additional risks.
The profitability of deposits in yuan is on average lower than the 1-3% nominally set by banks due to the fact that the deposit is processed through the conversion of ruble funds into yuan, which is accompanied by the payment of a commission by the depositor, points out Ekaterina Bezsmertnaya.
So far, there are not so many ways to invest in yuan: in addition to bank deposits, these are bonds of Russian companies issued in yuan.
Photo: Izvestia/Alexander Kazakov
— Both methods are too low-yielding and do not exceed 4.5% per annum. If the Chinese authorities devalue the national currency, then all income will be “eaten up” by the effect of the weak yuan,” notes Igor Fainman, investment adviser to the EUS Group of Companies.
The analyst calls stocks of Chinese companies a promising way to invest. They have already begun to appear on the Moscow Exchange and have good growth potential and good dividends for 2022. However, this option is only suitable for experienced investors who at least have a brokerage account and understand how to buy and sell stocks correctly.
However, the Chinese currency may well be considered as a tool for diversification and savings, and not as a way to extract additional profit. In this sense, deposits in yuan are quite a worthy alternative to deposits in “toxic” dollars and euros, the yield on which is now even lower.
Among the friendly currencies, the yuan, as the world’s reserve currency, is the most promising and stable – inflation in China over the past year is estimated at 1.8%.
Photo: Izvestia/Eduard Kornienko
– In any case, the strategy of shifting money into yuan does not guarantee profitability. This can somehow save us from inflation and the depreciation of the ruble in the long run, but it cannot be called earnings. Rather, it is a way not to lose your savings in value and to keep their real value,” emphasizes Artem Zvezdin.
The ideal proportion of the short-term foreign exchange portfolio, according to the analyst: the Chinese yuan – 20%, the dollar – 20%, gold – 20%, the rest is occupied by rubles. Long-term: yuan – 30%, gold – 30%, Russian ruble – 40%.
KSP Capital analyst Mikhail Bespalov also points out that it makes sense to use investments in the yuan to hedge the risks of the ruble depreciation.
“Although rates in yuan often turn out to be more than two, and sometimes even three times lower than rubles, getting additional interest on a deposit in a reliable bank is better than just buying foreign currency on the stock exchange. At the same time, even if you do not plan to buy expensive imported goods or go abroad, but you have savings, it makes sense to diversify your investments, thus reducing the currency risk, the expert concluded.
It should be borne in mind that the market for deposits in yuan is just being formed, and the place of the Chinese currency in the Russian economy will directly depend on cooperation between the two countries.