Should You Put Your Savings in a Chinese Bank Account?

Here's what I learned

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Wu Kaixiang/Xinhua/Corbis

In January, The Bank of China quietly announced a startling new bank account available to U.S. citizens. At a Bank of China branch in New York City, an American can walk in, open an account and convert grubby dollars into renminbi (RMB), the currency of the hottest and perhaps most important economy in the world.

To get a better sense of what this is all about, I went to the Bank of China's main branch in New York City at Fifth Avenue and 48th Street. The office is fairly ornate and staid, a study in 1950s elegance. The staff couldn't have been more welcoming, and I was ushered over to a young Chinese American who walked me through the account-opening process and answered all my questions. The biggest of which was: Why would anyone do this?

The Chinese currency is likely to appreciate in the years to come; Washington is vigorously lobbying for it, arguing that the Chinese have kept their currency value low to retain an unfair economic advantage. But the renminbi remains unconvertible. It does not float on international exchanges; you cannot trade it, and it does not fluctuate in value in the same global currency market that determines how many euros there are to the dollar and how many Mexican pesos you get for one Turkish lira. The new bank account does nothing to alter that, which makes opening an account in the U.S. denominated in RMB a bit, well, odd.

This seems all the more true when you find out you can't do much with the account: you can't write checks, withdraw renminbi from an ATM in any country, use a debit card or even deposit money into the account while in China.

"So what can I do?" I asked the very nice Bank of China representative.

"You can deposit a minimum of $500, and it will be converted to RMB. If the value of the Chinese currency rises, your dollar account will increase in value. Then you can withdraw dollars. And it is insured by the FDIC."

"Why would I want to open an account that I can't really use?"

"Well, if the rate on your savings or money-market account is barely 0% and if the Chinese currency appreciates between 3% and 5% a year, as it is expected to, then you can have a savings account at the Bank of China that yields you much more than any equivalent domestic American savings account with the same FDIC protection."

So there you have it: the Bank of China has created a kind of savings account that has a strong likelihood of significantly outperforming U.S. savings accounts. The Chinese have been making cars, solar panels, electronics and furniture that outcompete U.S. alternatives; now they are creating better bank accounts?

Well, that depends on where you think the renminbi is headed. But you could do worse than park $500 in an account insured by the U.S. government and tethered to the growth of the domestic Chinese economy. Renminbi savings bonds, here we come.