With Russia now officially cut off from both the USDollar and the euro, Russia's VTB Bank is seeing a surge in Chinese Yuan deposits, attracted by the bank offering significantly higher interest rates as Putin shifts focus to 'friendly' nations.
The state-owned bank is offering a Chinese yuan savings account with a maximum interest rate of 8%, hailing the currency as "one of the most affordable and promising options for investing funds" after the country was hit by Western sanctions.
Putting that in context, the three-month deposit rate is 8% in dollars and 7% in euros, while the six-month rate for ruble deposits is 21%, according to VTB.
Existing customers are reportedly able to open deposits remotely on VTB Online with a minimum amount of 100 yuan ($16). At VTB branches, they can deposit a minimum of 500 yuan. VTB also said that over the past week customers have placed more than 2 trillion rubles ($15 billion) in traditional savings products.
“Some Russian banks can’t get access to other currencies, so yuan is probably the best other alternative,” Khoon Goh, head of Asia research at the Australia & New Zealand Banking Group, told Bloomberg.
“Still, the easiest way for Russia to raise yuan would be to receive yuan via trades. Russian banks’ clients who are exporters could sell to China and receive renminbi as payment.”
As The Telegraph reports, the move comes days after it emerged that a string of Russian lenders including Sberbank and Alfa Bank were planning to use China’s UnionPay system to provide customers’ bank cards after Visa and Mastercard boycotted Russia in response to its invasion of Ukraine.
UnionPay is the dominant payments handler in China but has a small market share outside of the world’s second-largest economy.