In the same queue, Chen from Suzhou in eastern Jiangsu province said he was looking to buy an insurance policy to diversify his investments. “You should not put all assets in one basket, that is why I came here.”

10:28

‘Let it rot’: surviving China's high unemployment and cost of living

‘Let it rot’: surviving China's high unemployment and cost of living

China’s economic health worsened in June and July, with trade, inflation and lending declining while demand at home and abroad shrank. The country is facing a confidence crisis as its piecemeal approach to reviving growth disappointed investors, pressuring its currency.

The yuan has lost 5.4 per cent of its value against the US dollar this year and 7 per cent over the past 12 months. The offshore rate plunged to a nine-month low of 7.3451 per US dollar on Thursday, according to Reuters, while the onshore yuan hit the lowest level since November at 7.3008 per dollar.

Foreign investors have taken US$7 billion out of the onshore stock market this month, Goldman Sachs said. The Wall Street bank forecasts the yuan will weaken to 7.2 per dollar by the end of 2024, from 6.98 per dollar at end-2023, according to reports to clients this week.

Commercial banks in Hong Kong like HSBC are dangling lucrative incentives to attract more customer deposits, given that the cost of borrowing between lenders in the interbank market has surged. Others have offered Sunday banking to accommodate mainland customers.

HSBC offers up to 10 per cent rates on deposits for certain investment clients, while other rival lenders are offering 4 per cent to 8 per cent on fresh deposits. Banks in mainland China currently pay about 1.25 per cent to 1.65 per cent annually on similar time deposit accounts.

Sales of new life insurance policies in Hong Kong to mainland Chinese visitors jumped 28-fold to HK$9.61 billion (US$1.23 billion) in the first quarter from a year earlier, according to data published by the Insurance Authority.

“More mainland customers will come to Hong Kong to exchange their yuan into Hong Kong dollar or US dollar deposits, or buy investment products in these currencies as a hedge,” said Jasper Lo, an independent currency analyst. “Investors can enjoy higher interest rates offered by banks in Hong Kong and potential currency gains. It is a good diversification strategy.”

Under China’s capital controls, mainland residents are limited to transferring US$50,000 outside the country annually, according to Horizons, a consultancy. Overseas withdrawals at ATM machines are limited to 100,000 yuan per person per year. Local and foreign travellers can carry 20,000 yuan of cash in and out of China, while higher amounts would require more documentations, it said.

Lo believes there’s room for the yuan to depreciate to 7.50 yuan per dollar in the medium term. However, the Chinese currency is unlikely to reach a “panic level” of 7.80 per dollar. The last time the yuan reached parity with the Hong Kong dollar was in 2007, before the global financial crisis.

“Beijing is surely sensitive to [yuan] volatility after a couple of months of relatively fast depreciation,” Nomura economists including Lu Ting said. “Beijing fears that a sustained depreciation will trigger even larger capital outflows, which would impair domestic consumption and investment.”

03:11

China real estate woes: Evergrande files for bankruptcy protection in New York

China real estate woes: Evergrande files for bankruptcy protection in New York

Property prices in tier-one cities such as Shanghai and Shenzhen are declining, due in part to those high-net-worth individuals who try to sell their homes there and take the money offshore, they said in a report on Friday.

“These efforts have been successful,” a BEA spokesman said. “Notably, the intake of new-to-bank cross-boundary customers in the first half is higher than pre-Covid-19 levels.”

The number of new accounts opened by Bank of China (Hong Kong)’s cross-border clients rose by five times from a year earlier in the January-to-April period. It was also 44 per cent higher than the same period in 2019.

02:35

Mainland China to open all borders with Hong Kong and Macau, travel tours to resume

Mainland China to open all borders with Hong Kong and Macau, travel tours to resume

In the Greater Bay Area, new accounts opened by clients at Standard Chartered between January and June have surpassed the total in 2022, the bank said. At HSBC, new accounts by non-residents in the second quarter were double the level in the same period 2019, it said.

New accounts for mainland Chinese customers at OCBC Hong Kong have risen 12 times in the first half of this year, versus the same period in 2022. They seek wealth diversification, access to international markets, and foreign exchange opportunities, a bank spokesman said.

DBS Bank (Hong Kong), a unit of Singapore’s biggest lender, has seen an average 60 per cent monthly increase in new account opening this year, compared with pre-pandemic levels, said Amy Kwan, executive director of the consumer banking group.

“Mainland Chinese individuals who frequently travel to Hong Kong for personal or business purposes may find it convenient to have a local bank account,” she said. “It can facilitate daily banking needs, such as cash withdrawals, currency exchange, and paying their children’s overseas education and tuition fees.”