TOKYO REPORT: Yuan-Related Banking Services Growing

Tokyo, Sept. 6 (Jiji Press)--Banks in Japan, including foreign
banks, are starting services to meet growing demand for yuan-denominated
deposits and accounts for trade settlements in the Chinese currency by
individuals and businesses.
The first yuan-denominated deposit in Japan was launched by the
Bank of China in December last year, setting an interest rate for a one-year
time deposit of 0.45 pct per annum, lower than in China.
HSBC Holdings PLC, a major British financial group, followed suit
in May, allowing affluent Japanese individuals to open yuan accounts at its
branches in China. The new service offers an interest rate of 2.25 pct for
one-year time deposits, much higher than major Japanese banks'
yen-denominated one-year deposits, which carry rates of around 0.06 pct.
With yuan deposits allowing users to secure foreign-exchange gains
when the Chinese currency appreciates, HSBC was flooded with inquiries about
the service when it started, according to a public relations official.
China's removal in June of restrictions on the use of the yuan for
trade settlements has added further momentum.
Settlements in yuan used to be limited to certain economies,
forcing companies to make remittances in dollars and other currencies to
China to settle deals with Chinese companies.
Now that companies can open yuan-denominated settlement accounts in
China, they can avoid foreign exchange risks in deals with Chinese
businesses and cut back on the time and costs needed for overseas
remittances, says an official at Sumitomo Mitsui Banking Corp.
Japan's top three banks--Bank of Tokyo-Mitsubishi UFJ, Mizuho
Corporate Bank and SMBC--have started services that allow Japanese companies
to open yuan-denominated accounts in China.
Some regional banks have also launched similar services for local
businesses, by opening such accounts at Tokyo-Mitsubishi UFJ's branches in
China.
But the Chinese government still maintains restrictions on the use
of yuan-denominated accounts by foreign companies and individuals, wishing
to avoid an inflow of speculative funds into China.
For example, the Chinese authorities have imposed annual ceilings
on the deposits that HSBC can accept under its new service and on
withdrawals from them by overseas depositors. Remittances in yuan to outside
China are banned.
The use of yuan-denominated accounts by corporate depositors is
also limited to trade settlements.
In these circumstances, banking services related to the yuan still
have a long way to go to become friendly to users and would need
deregulation by the Chinese government.

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