The Renminbi Foreign Currency Account in Malaysia

Public Bank Berhad, in collaboration with Bank of China (Malaysia), has just launched on the 18th Jan 2010 the first Renminbi Foreign Currency Account (CNY FCA) by local bank in Malaysia for both Fixed Deposit as well as Current Account.

For Fixed Deposit Account, the following is the interest rate as well as the additional interest rate for the first placement only during the promotional period, obtained this morning from the bank branch.

The minimum amount to open the foreign currency account is RM10,000 equivalent of Renminbi. (Customers can not open account or top up additional receipt using the Renminbi notes). The additional 2% mentioned in the press release is actually the promotional rates given to the existing MYR FD account holders to convert to this CNY FCA account without the fear of losing the interest rate earned in the existing MYR FD account.

In anticipation of the currency appreciation or interest rate upward revision in China in the very near future, I opened the fixed deposit account this morning. A surprise welcome mug is received. There were already a few customers like me queueing up first thing in the morning to open the first ever Renminbi Foreign Currency Account in Malaysia. I can expect the overwhelming response as lot of people have long waited for this to capitalize for the anticipated Renminbi appreciation, other local banks will probably lining up to offer the similar service very soon.

The Renminbi Current Account is also available at the same time with the interest rates of 0.4%. As there does not seem to have other additional benefits other than the marginal interest rate and the potential currency appreciation, I did not open this current account. The initial minimum deposit amount for current account is USD1,000 equivalent in CNY.

However this investment is not necessary a sure-win as it is betting on the assumption that China will appreciate their currency in this year (say in the range of 5-6% as commonly predicted) and our MYR currency does not appreciate that much or better still stays status-quo. There is concern that our currency will also appreciate at the same time (like other currencies in Asia Pacific region) when China removes the repeg and allows the renminbi to appreciate again, making this investment less favourable. There was similar "alignment" experiences in the past when our government removed the currency peg to USD on 21 July 2005, at the same day shortly after the Chinese government announced their decision to lift their currency peg to USD to a managed floating exchange rate with reference to a basket to foreign currencies.