NEW YORK (MainStreet) – With all kinds of talk that China is about to overtake the U.S. as the world’s number one economy, the Bank of China is finally allowing American consumers to open a banking account and is opening up its formerly closed currency to U.S. bank customers.
The Bank of China is allowing U.S. citizens to invest up to $4,000 per day (limited for now to an annual total of $20,000) in a local account, according to the Wall Street Journal.
Typically, the Chinese yuan, also known as renminbi (RMB), has been closed to U.S. banking consumers.
The decision came down in January, and accounts can be opened in three U.S. locations, two Bank of China branches in New York and one in Los Angeles.
For U.S. investors looking for a fresh currency option, the yuan opportunity may be a decent one. The Chinese economy is growing at a much faster pace than the U.S.
Investment website TradingEconomics.com, puts the numbers in perspective:
“The Gross Domestic Product (GDP) in China expanded 9.80% in the fourth quarter of 2010 over the same quarter last year. From 1989 until 2010, China's average quarterly GDP Growth was 9.31% reaching a historical high of 14.20% in December of 1992 and a record low of 3.80% in December of 1990. China's economy is the second largest in the world after that of the United States. During the past 30 years China's economy has changed from a centrally planned system that was largely closed to international trade to a more market-oriented one that has a rapidly growing private sector.”
Compare that to recent U.S. GDP growth: According to the Commerce Department, GDP growth in 2010 came in at 3.1%.
Besides strong economic growth in China, there are other reasons you should pour some funds into the yuan. Currency value opportunities are strong, economists say. Each yuan is worth about 15.1 cents, but fair value for Chinese currency is about 27 cents, according to the International Monetary Fund.
Another advantage to investing there is that your Chinese bank account would be FDIC-insured, meaning your money is protected in the event of bank failure (but not in the event of a swing in the exchange rate).
What follows are tips for opening an account. Remember, it's first opened you’ll be converting your U.S. dollars into RMB.
• You’ll require at least $500 to open an account.
• You need to bring your Social Security card and two valid I.D. documents.
• You’ll fill out an application, a W-9 form and a signature card.
• Right now, you can only open a savings account – not a checking account.
• You can only fund your RMB account; you cannot withdraw renminbi cash from it yet.
• You can transfer RMB back and forth from your RMB account in China or Hong Kong.
Given the precarious state of the U.S. economy, getting a financial foothold in the booming Chinese economy seems like a good idea. Opening a Chinese banking account can be the first step.
For more information, visit the Bank of China online or call 212-935--3101.