Foreign currency-denominated financial products in China recently saw a jump in popularity, following the weakening of the renminbi, reports Shanghai's China Business News.
Foreign currency-denominated products had been keeping a low profile in the market, but some have surged or even doubled from the same period last year to as high as over 5% on an annual basis.
A bank official in Shanghai told the paper that the number of clients inquiring about such products has increased, and that the bank has recently introduced three to four investment schemes.
An analyst said that the surge in these products' popularity is a result of the People's Bank of China, the country's central bank, relaxing the yuan's trading band from 1% higher or lower than the daily reference rate to 2%, and because of the recent depreciation of the Chinese currency.
Products denominated in US and Australian dollars are the most common in the market, a financial adviser told the paper, and the return on products denominated in the Australian currency is the highest —generally above 5%.
In comparison, the average return on foreign currency-denominated products was only 2.79% last year, according to financial services company Bankrate. The return of foreign currency-denominated products is still lower than those denominated in the yuan, however.
Experts have cautioned investors about the risks and inconvenience of investing in products denominated in foreign currencies, given the growing fluctuation in the forex market.
Despite the yuan weakening recently, analysts are of the view that the Chinese currency is expected to appreciate in the long term and that investors may incur losses in exchange rates.
The complicated procedure of investing in these products, which can take up to one week, as well as the high minimum required investment, usually around 50,000 yuan (US$8,000), also affect investors' willingness to channel money into them.
Liu Dongliang, an analyst at China Merchant Bank, stated that except those who plan to study or emigrate abroad, there is no need to consider foreign currency-denominated products.
