China’s new deposit product takes off

    chinese bank, icbc

    Five Chinese banks will test the viability of issuing certificates of deposits issued to foreign financial institutions, according to Reuters.

    Bank of China, China Construction Bank, Industrial and Commercial Bank of China, Shanghai Huarui Bank and Shanghai Pudong Development Bank will issue the instruments to foreign financial institutions operating inside the Shanghai Freeport Zone, it said.

    Chinese banks have recently been given the green light to issue certificates of deposits to foreign financial institutions as part of the government’s efforts to liberalize the banking system and  help develop more financial products that banks can issue to raise funds.

    The latest move boosted expectations that the central bank, the PBOC, will soon lift the cap on deposit rates, giving banks the freedom to price funds that they take from their depositors.

    Photo credit: China Supertrends via Flickr