Shanghai residents have responded positively to the sale of China's first batch of treasury bonds and foreign currency investment products this year as they offer higher returns than bank deposits.

The Shanghai branch of the Bank of China, the city's largest foreign currency lender, said almost all of its assigned 280 million yuan (US$33.74 million) worth of T-bonds had been sold out on the first day of their sale.

China began to issue the bonds, worth 45 billion yuan, from Monday, which bear interest rates of 2.52 and 2.83 percent with maturities of three years and five years respectively.

"The Higher returns are the main reason for the hot sale," said an official of the branch.

The current interest rates on three-year and five-year bank deposits stand at 2.016 percent and 2.232 percent respectively after deducting a 20 percent interest tax.

The T-bonds interest is exempted from tax.

Meanwhile, local bankers are keen to launch more forex-denominated investment products for individual investors to capitalize on an increasing amount of personal forex assets.

The local branches of BOC, China Construction Bank, Citibank and Standard Chartered Bank have been rushing to market their foreign exchange investment products since the second half of last year.

Most of these products carry flexible interest rates that are linked to the international foreign currency or interbank lending market.

The BOC's local branch said that it will start to sell its seventh batch of individual forex investment products since last August from Friday to March 16.

The products offer guaranteed first-year returns of 5.6 percent and 5 percent on six-year US dollar-denominated accounts and five-year HK dollar accounts respectively.

"Our research indicates that as investors seek to better manage and increase their wealth, a variety of foreign currency investment products are needed," said Richard Stanley, country officer of Citigroup China.

(East Daily March 3, 2004)