This page is dedicated to offering regularly updated financial education for China from basic to advanced topics. If you have a question not addressed in the resources below, please submit it through the request forms, and we will get back to you! Lastly, recognizing the value of your time, we've marked essential topics with yellow icons for quick identification. Dive in and embark on your financial journey!
The ‘Nation Profile’ section is a brief yet informative look at China’s economic and financial history, current standing and future trends.
Overview: The banking system in China is seen as stable but is experiencing a necessary yet prolonged economic and financial transformation(1,3). A few of the main regulatory improvements being made are increased reporting/auditing and increased due diligence of where government spending is allocated. Despite these necessary improvements, this process has created conflicts between the government—both federal and local—and the banking sector.
Issues such as maintaining failing businesses and increasing banking regulations while striving to preserve the high returns of previously unregulated investments have led to instability in the financial system(1,2). These challenges have also made it difficult for the public and private sectors to align their goals.
The International Monetary Fund (IMF) adopts an optimistic view of China’s banking system while highlighting some concerns(1,2). China’s impressive economic growth has continued since the 2011 FSAP(Financial Sector Assessment Program), and it is now undertaking a necessary but prolonged economic and financial transformation(1,2). However, strains have also emerged in various areas of the Chinese financial system, such as an increase in debt.
China currently maintains a positive balance with the International Monetary Fund (IMF). However, the country’s debt is growing due to prolonged banking issues, which could potentially alter this balance (1,2). Additionally, China defaulted on its debt in 1938 during the conflict with Japan but has not defaulted on its sovereign/national debt since then. This is because they have always been able to obtain the needed money through different avenues (1,2,3,4). However, the nation has had many near instances of defaulting (2,3).
Currently, China is rated by the three big credit agencies. Standard & Poor’s credit rating for China stands at A+ and anticipates no rate change in the future(4). Moody’s credit rating for China was last set at A1, but anticipates a rating downgrade in the future(4). Fitch’s credit rating for China was last reported at A+ with anticipation for a future rating drop due to corporate debt defaults(5).
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Inflation is the rate at which the general level of prices for goods and services rises, and subsequently, purchasing power falls. It’s a key economic indicator that is closely monitored by governments and central banks worldwide. Causes of inflation can include increased production costs, higher demand for goods and services, and changes in government policy.
Overview: Inflation is the rate at which the general price level of goods and services rises, eroding purchasing power over time. It’s vital to understand inflation because if your income does not increase at the same pace as inflation, your spending power decreases, making it harder to afford the same lifestyle and save for future goals.
Inflation profile: In 2024, China’s inflation rate was around 0.4%, significantly lower than the global average of 5.2%, indicating a stable economic environment. The sectors most affected by inflation are healthcare, education, and miscellaneous services. In the healthcare sector, inflation has been driven by rising input costs, including labor and pharmaceuticals, but government interventions and price controls have moderated the overall impact on consumer prices. The education sector has faced inflationary pressures due to increased demand for private education and rising operational costs, though public spending on education has helped mitigate some of these effects. Miscellaneous services, which include a wide range of services, have seen inflation influenced by factors such as labor costs and service demand, but the overall inflation rate in this sector has remained relatively low.
On the other hand, the transportation and communication sectors have experienced a decrease in prices, largely due to falling fuel costs and technological advancements that have reduced operational expenses. The food sector, contributing 31.8% to the Consumer Price Index (CPI), also saw a decline in prices, primarily due to oversupply in certain food categories and government efforts to stabilize food prices. Non-food prices remained stable with minor fluctuations in clothing, housing, and health, reflecting effective government policies and the diversified nature of China’s economy. China’s unique inflation dynamics in 2023 can be attributed to weak domestic demand, a housing market slump, and government policies focused on supporting production and investment rather than consumption. High youth unemployment and low wage inflation have further minimized the nation’s inflation.
What is being done (National level): In response to China’s inflation, the People’s Bank of China (PBOC) and the State Administration of Foreign Exchange (SAFE) have implemented various measures to effectively stabilize the economy. These include controlling money supply, interest rates, and regulating foreign exchange. The Renminbi’s exchange rate and inflation is carefully managed, and Chinese nationals can convert up to $50,000 USD annually for personal use. These efforts aim to control capital outflows and maintain domestic currency stability, which seem to work as the inflation rate in 2024 has been less than 1% over the last few months.
Live Inflation Link
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Banks are for-profit, public financial institutions offering a wide variety of financial tools and services. Credit unions are nonprofit, member-owned cooperatives often offering lower fees and higher savings interest rates.
Overview: Credit unions and banks are both vital financial institutions. Credit unions are member-owned not-for-profit entities with lower interest rates. Banks are shareholder-owned for-profit organizations with wider service offerings, such as investment tools, credit cards, customer service, and more locations.
Banking Profile
China’s banking system has undergone significant transformations since the founding of the People’s Republic of China in 1949(1). The banking system was initially monolithic, with the People’s Bank of China (PBoC) as the main entity authorized to conduct operations(2,3). However, in the early 1960s, the government allowed five state-owned specialized banks to accept deposits and conduct banking business(2,3).
State-owned banks in China, such as the “Big Four” (Bank of China, China Construction Bank, Agricultural Bank of China, and Industrial and Commercial Bank of China), are among the largest banks in the world(2,3). These banks are often burdened with social responsibilities, such as providing loans to sectors that may not be profitable but are deemed important for the nation’s development(4). This can limit their ability to innovate and respond to market changes quickly(4). On the other hand, private banks in China, which were approved for operation in mainland China in 2014, have more flexibility in their operations(5,6). These banks are often criticized for their focus on short-term profits, which can lead to lending to riskier clients and compromising the bank’s financial stability(5,6). Moreover, the ownership structure of private banks can sometimes lead to conflicts of interest, as they may prioritize the needs of their parent companies over those of their customers(6).
China’s banking sector has faced regulatory, economic and geopolitical issues(7). These challenges include strict regulatory measures aimed at curbing risky lending practices and managing bad debts. Economically, the sector has been impacted by the slowdown in GDP growth and the debt risks in the real estate market. Geopolitically, tensions with other major economies have added to the uncertainty, affecting global trade and financial stability.
Additionally, in recent years, mistrust in banks has grown significantly due to a series of financial crises and mismanagement issues. Many smaller banks have collapsed or been absorbed by larger institutions, leading to concerns about the stability of the banking system. Additionally, fraudulent activities and risky investments have further eroded public confidence, causing widespread anxiety among depositors(11). This has resulted in protests and a general sense of unease about the safety of their savings. To address these concerns, China has implemented a deposit insurance program that insures deposits up to 500,000 yuan (USD $81,433) per depositor per bank, aiming to protect the interests of depositors and maintain financial stability.
However, despite these challenges, China’s banking sector has shown resilience and has made significant improvements such as ramping up their credit support and resilience for the economy, optimizing the banking loan structure, and improving asset quality(7, 8). China has also established a deposit insurance system to protect the lawful rights and interests of depositors, prevent and eliminate financial risks, and maintain financial stability(9). The deposit insurance system covers commercial banks, rural cooperative banks, and rural credit cooperatives depositors up to 500,000 Yuan(10). Under the system, a depositor can expect to receive an insurance payout within seven working days after an incident(10).
Despite these challenges and complexities, it is still advisable to keep your money in a bank in China. Banks, whether state-owned or private, offer a safer environment for your money compared to keeping it at home. Money kept in a bank can also earn interest over time, contributing to the growth of your wealth. However, it is crucial to understand your bank’s terms and conditions and ensure that it is a reputable institution. Check its default history, deposit insurance coverage, and its coverage in the news (good and bad). In conclusion, China’s banking sector continues to make improvements to develop its infrastructure further, striving to offer better services to its customers.
Bank Recommendations:
Bank Name (Link Included) |
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Online and Mobile Banking provide convenient access to your financial accounts at any time and anywhere. Manage your money securely from your computer, tablet, or smartphone with features like bill pay, mobile deposits, and account monitoring.
Overview: Mobile banking allows users to conduct financial transactions and manage their accounts using a smartphone, tablet, or computer. It typically involves accessing a banking app or website to check balances, transfer funds, pay bills, deposit checks remotely, and receive account notifications.
Benefits of Mobile Banking
Banks and Credit Unions with Mobile Banking
Bank Name |
Reliable Peer-to-Peer (p2p) Payment Platforms
P2P App Name |
Alipay |
WeChat Pay |
Union Pay |
JD Pay |
Tenpay |
Concerns about Online Banking
Sources
Currency and currency exchange are important to any nation’s economy, influencing transactions from everyday grocery shopping to international trade. Monitoring the strength of a currency and its global exchange rate is crucial, as these factors can significantly affect the cost of daily commodities and the preservation of personal wealth.
Overview: Currency is the official medium of exchange used within a specific country or region, composed of banknotes and coins issued by the government. Currency exchange is the process of converting one currency into another at a determined rate, crucial for international trade, travel, and investment. This exchange is facilitated by banks, currency exchange services, or financial institutions, with exchange rates influenced by factors like supply and demand, economic conditions, and geopolitical events.
Overview (Nation Specific): In China, the national currency, the Renminbi (RMB), is managed through a floating exchange rate system. The People’s Bank of China (PBoC) has been refining the foreign exchange management system since the major reform in 1994. This reform aimed to create a more market-oriented exchange rate system by moving away from a fixed exchange rate and adopting a more flexible exchange rate based on market supply and demand. This system allows the PBoC greater flexibility to intervene in the market when there are large changes in value to the RMB compared towards a set group of different currencies, in order to control the value of the RMB and maintain stability.
What this means for individuals in China is that the shift to a market-oriented exchange rate system means that the value of the RMB is more influenced by global market forces. In the short term, this can lead to fluctuations in the value of the currency, which might affect the prices of imported goods and travel expenses. However, in the long term, a more stable and transparent exchange rate system can lead to a stronger economy, more investment opportunities, and better financial stability for individuals and businesses.
Furthermore, the implementation of a managed floating exchange rate with clear guidelines has successfully reduced the practice of multiple currency exchange rates within the country. This move is expected to further strengthen the country’s financial infrastructure and currency stability.
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Remittances are funds sent by foreign workers to their home country, often serving as a significant source of income for their loved ones in their home country. These transfers, usually made through banks or money transfer services, can exceed official development aid amounts and contribute significantly to a country’s GDP and communities.
Overview: Remittances refer to money sent by individuals working abroad to their home country, usually to support family members or for other purposes. These transfers often occur through specialized remittance services or international money transfer platforms, facilitating economic support and development in the recipient country.
Recommendations for the best way to send remittances
Service Provider (Link Included) |
Sources
Retirement planning is the process of determining retirement income goals and the actions necessary to achieve those goals. It involves identifying sources of income, estimating expenses, implementing a savings program, and managing assets. This planning is crucial for maintaining a comfortable lifestyle after work, and it’s recommended to start as early as possible.
Overview: Retirement plans are financial strategies aimed at helping individuals save and invest for their post-employment years. These plans, which can include employer-sponsored options and personal savings accounts (High Yield Savings), offer various benefits and investment opportunities tailored to individuals’ needs. Participants contribute regularly to these accounts during their working years, with the aim of building a financial cushion to support their retirement lifestyle.
Nation Specific:
In China, the retirement system is structured into a two-tier pension system, which includes a basic pension and a mandatory second-tier plan(1). The basic pension is a pay-as-you-earn system funded by employers and pooled at the local government level. The second tier consists of individual accounts, which are financed by employees’ contributions. This system primarily covers urban workers, with many parameters depending on province-wide average earnings rather than national averages(1). This approach aims to provide a more tailored and region-specific retirement solution for workers across different provinces.
Retired employees who have contributed to the pension system for a minimum of 15 years are entitled to a basic pension(1). The basic pension pays 1% of the national average individual wage and the province-wide average earnings for each year of coverage(1). Employees also pay 8% of wages to the individual account system(1).
In addition to the state-led pension system, there are voluntary employee pension plans from employers, and private voluntary pension schemes(2). However, these corporate retirement plans and private schemes remain underdeveloped and ever-changing (2).
The official retirement age for men is 60 years, 55 years for white collar women and 50 years for blue collar women(1,2). However, China is planning on raising its retirement age as its working-age population shrinks(2,4).
While the system is more standardized than neighboring nations, it is mostly administered at a provincial level rather than as a nationwide scheme(2). This leads to disparities across provinces, with some facing pension deficits(2). The Chinese government is aware of these issues and is working on policy reforms to ensure the sustainability of the pension system across public and private sectors(2,3).
What can I do?
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Estate planning is the process of organizing your personal and financial affairs to prepare for the possibility of mental incapacity and eventual death. It involves creating legal documents such as wills and trusts, and taking inventory of assets. The goal is to preserve the maximum amount of wealth possible for the intended beneficiaries.
Overview: Estate planning is a transfer process that involves making preparations during a person’s life for the management of their estate in the event of death or mental incapacitation. It encompasses various aspects, including wills, trusts, beneficiary designations, powers of appointment, property ownership, gift, and powers of attorney. The goal is to ensure the greatest possible value of the estate is preserved while considering tax implications and any potential legal problems. If an estate plan is not agreed upon by the individual, the government will decide how to distribute their assets once presumed dead.
The most common type(s) of estate planning
How a transfer process takes place
Estate Tax Rates
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Income tax is a financial charge imposed by governments on the income or profits of individuals or entities. It applies to various forms of income, including salaries, wages, business profits, and unearned income, such as interest, dividends, and capital gains.
Overview: Income taxes are the portion of your earnings that you’re required to pay to the government. They fund public services like schools, roads, and healthcare.
Tax Brackets
Income tax brackets categorize taxpayers into different groups based on their income levels, with each group subject to a specific tax rate corresponding to their earnings.
Tax Rate | Taxable Income Threshold (CNY) |
3% | 0 to 36,000 |
10% | 36,000 to 144,000 |
20% | 144,000 to 300,000 |
25% | 300,000 to 420,000 |
30% | 420,000 to 660,000 |
35% | 660,000 to 960,000 |
45% | Over 960,000 |
Common Tax Deductibles: A tax-deductible is an expense that can be subtracted from an individual’s or business’ taxable income, reducing the amount of income subject to taxation.
Nation Specific Deductions
Tax Returns
A tax return is a form submitted to the tax authority that reports income, expenses, and deductibles to calculate taxes owed or refunds due. In China, depending on an individual’s circumstances, they may be eligible for a tax return. Please consult with a tax professional to determine eligibility and provide guidance on the process.
*Information above relating to China Taxes was pulled from the ‘China Tax Booklet 2021-2023’
Due Date for Taxes
In China, the tax year runs from January 1st to December 31st. For individuals, provisional tax returns for employment income must be filed monthly, while other income categories may require monthly, annual, or transaction-based returns. The annual reconciliation tax return for comprehensive income is due between March 1st and June 30th of the following year, For enterprises, provisional income taxes are filed and paid monthly or quarterly, with the annual income tax return and settlement due within five months after the end of the tax year.
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The stock market is a complex network where shares of companies are bought and sold. It plays a crucial role in global economies by enabling money to move between investors and companies.
Overview: The stock market is a public arena where shares of companies are traded at agreed prices. It’s a universal mechanism for companies to raise capital and for investors to gain partial ownership in these companies. The price of a company’s stock is subject to fluctuations based on numerous factors such as supply and demand, the company’s financial health, and wider economic indicators. While the stock market can present risks, it also offers a significant avenue for wealth creation over time.
Stock Market Profile
China’s financial market is dominated by the Shanghai Stock Exchange (SSE), Shenzhen Stock Exchange (SHE), and the newly established Beijing Stock Exchange (BSE). As of May 2024, the total market capitalization of all domestic companies listed in China was approximately 10,656.018 billion USD, including the BSE’s market capitalization of nearly 363 billion yuan. The China Securities Regulatory Commission (CSRC), a government agency under the State Council of the People’s Republic of China, oversees the securities industry. China has been progressively opening its financial markets to foreign investors, with the CSRC permitting both resident and non-resident foreigners to participate in securities trading.
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Credit scores and systems are integral to financial health, serving as a measure of an individual’s or entity’s ability to repay debts and manage credit responsibly. As it can significantly impact your ability to secure loans, mortgages, or other forms of credit, and can even influence the interest rates you’re offered.
Overview: A credit score is a numerical measurement of an individual’s creditworthiness, influenced by factors like payment history, amounts owed, and length of credit history. This score plays a significant role in determining eligibility for loans, credit cards, and even housing. A higher score can lead to better financial opportunities.
Credit System Profile
China’s credit scoring system, known as the Social Credit System, is a rating system that assesses the financial trustworthiness and behavior of individuals, businesses, and government entities. This assessment is based on their actions, such as timely bill payments, interactions with other entities, and compliance with regulations. Higher scores typically grant access to more opportunities and benefits, while lower scores can result in restrictions and penalties. The system is regulated by thousands of legal regulatory documents, and there are substantial regional differences in implementation and evaluation standards.
Private tech companies, such as Alibaba’s Sesame Credit, have created their own trust-rating initiatives, separate from the official Social Credit System. The system ranges from a low score of 350 to a high score of 950. The consequences of a poor social credit score could affect travel prospects, employment, access to finance, and the ability to enter into contracts. A positive credit score could make a range of business transactions much easier.
The Chinese government has initiated steps to more clearly define “social credit,” establish practices, and improve measures for credit repair. For example, they have introduced guidelines for correcting inaccurate credit information and have set up mechanisms for individuals to appeal their scores. Progress on a Social Credit Law has started, but it may take years until core mechanisms become standardized nationwide. So far, the government has drafted initial versions of the law and conducted pilot programs in various regions to test its effectiveness. Future steps include refining the law based on feedback from these pilot programs and gradually implementing it across the country.
What can I do?
In China, enhancing one’s standing in the Social Credit System involves demonstrating a lifestyle of responsible behavior. This includes consistently fulfilling legal obligations and contractual commitments. Failure to do so can negatively impact one’s social credit record. It is also advised to maintain a good financial record, which includes timely payment of bills and loans, and prudent use of credit facilities. While the exact mechanisms for the Social Credit System vary across regions, these principles are universally applicable and can help individuals and businesses improve their trustworthiness in the system.
To get started with tracking and improving your social credit score, you can use platforms like Alibaba’s Sesame Credit. Additionally, you can visit bank branches such as the People’s Bank of China in your city and make a credit score inquiry through manual service counters or self-service inquiry machines, with your original ID card. You can also log on to the official website of the Credit Reference Centre and visit the personal credit information service platform for inquiry. Just remember, checking your credit score through this method is known as a “soft pull” and doesn’t affect your credit unlike a “hard pull” when you apply for a loan.
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Financial scams are fraudulent schemes that trick individuals or organizations into losing money. Scammers exploit various channels and use advanced techniques, including phishing attacks and investment scams.
Overview: Scams are deceptive schemes or fraudulent activities designed to trick individuals or organizations into giving away money, personal information, or other valuable assets. They often exploit trust, fear, or unfamiliarity, posing as legitimate businesses, organizations, or individuals. Common types of scams include phishing emails, fake investment opportunities, get-rich courses, romance scams, and lottery scams.
Common scams: If you’re uncertain whether something might be a scam, don’t hesitate to contact the Collatz Capital Foundation through our one-on-one form. We’re here to assist you in identifying potential scams. We also strongly encourage you to utilize Collatz as a resource to prioritize your safety. Falling victim to scams can have severe financial consequences, legal ramifications, and in some cases, even pose life-threatening risks.
Online Scams & Human Trafficking
Investment/Crypto Scams
Phishing
Dear Costumer,
We’ve detcted suspicous activity in you’re Google account. Your account may have been acessed by someone else. To protekt your account, it’s been temporarly locked.
Please **click here** to verify your identy and restore full access. Do this within 24 hours or your account will be permanantly deleted!
Best,
Googel Support
“Get rich quick” Online Courses
Business Capital Raise Scam
Online Catfishing (Pig Butchering)
Receive Money, Keep a Percentage (Money Mule/Transfer Scam)
I have fallen victim to a scam, what do I do? If you suspect you have fallen victim to a scam, please reach out to the foundation immediately via the one-on-one link provided. Depending on the details of the scam, such as severity, impact, and the safety of the victims, we may be able to offer assistance or provide guidance to mitigate negative impacts.
Sources
The Tools & Resources section encompasses tools and regional organizations that can help empower your financial journey, from budgeting to seeking aid.
Overview: The financial resources below are a compilation of apps and tools identified by Collatz that can be beneficial in one’s financial success. These range from tools in budgeting, non-profit aid and maintaining consistency in one’s financial plan.
Mobile Apps
Below is a table that includes some helpful finance resources
Resource | Description | Cost |
Alipay | Payments | Free |
WeChat Pay | Payments | Free |
Buxfer | Budgeting | Free |
Organizations & Programs
Definitions
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Financial terminology encompasses the specialized language(jargon) used to describe various aspects of money management, investment strategies, and economic concepts, essential for effective communication and understanding in the world of finance. Click here to learn the most common terms!
Income: The money received regularly for work or through investments.
Expenses: The costs incurred for goods, services, and bills.
Emergency Fund: Savings set aside specifically for unexpected expenses or emergencies.
Credit Card: A card allowing the holder to make purchases on credit(borrowed money), with a limit set by the card issuer.
Loan: A sum of money borrowed from a lender, to be repaid with interest.
Bankruptcy: A legal status of being unable to repay debts, resulting in a court process to resolve financial obligations.
Compound Interest: Earning interest on both the initial principal and the accumulated interest over time.
Retirement Account: A tax-advantaged investment account to save for retirement, often offered by employers.
Net Income: The amount of money left after deducting taxes and other deductions from one’s gross income.
Assets vs. Liabilities: Assets are what you own, while liabilities are what you owe. The difference is your net worth.
Credit Report: A detailed record of a person’s credit history, including credit cards, loans, and payment history.
Budgeting: Creating a plan to manage and allocate money for various expenses and savings.
Down Payment: A portion of the total cost paid upfront when making a big purchase, like a home or car.
Insurance: A financial arrangement that provides protection against financial loss or risk.
Depreciation: A decrease in the value of an asset over time.
Inheritance: Money or assets passed down to heirs after someone’s death.
Stocks: Ownership shares in a company, representing a claim on part of the company’s assets and earnings.
Mutual Fund: An investment vehicle that pools money from many investors to buy a diversified portfolio of stocks, bonds, or other securities.
Interest: The cost of borrowing money or the return on investment, expressed as a percentage.
Principal: The initial amount of money borrowed or invested, on which interest is calculated.
Simple Interest: Interest calculated only on the initial principal amount over a specified period.
Compound Interest: Interest calculated on both the initial principal and the accumulated interest from previous periods.
Rate of Interest: The percentage at which interest is charged or earned over a specified period.
Lender: An individual, institution, or entity that provides money to a borrower, typically in exchange for interest.
Borrower: An individual, company, or entity that receives money from a lender with the obligation to repay it, usually with interest.
Annual Percentage Rate (APR): The total cost of borrowing, expressed as a yearly interest rate, including fees and other costs.
Term: The period for which a loan or investment is agreed upon, influencing the total interest paid or earned.
Fixed Interest Rate: An interest rate that remains constant throughout the term of a loan or investment.
Variable Interest Rate: An interest rate that can change over time, typically influenced by market conditions.
Credit Card Interest: The interest charged on outstanding balances(money owed) of credit card debt.
APY (Annual Percentage Yield): The total annual interest earned on an investment, including compounding, expressed as a percentage.
Prime Rate: The interest rate at which banks lend to their most creditworthy customers.
Installment Loan: A loan repaid with a fixed number of equal payments over a specified period.
Interest-Only Loan: A loan where the borrower pays only the interest for a certain period before starting to repay the principal.
Usury: The illegal or unethical practice of charging excessively high interest rates on loans.
Default: Failing to meet the agreed-upon terms of a loan, such as missing payments, leading to financial consequences.
Prepayment: Paying off a loan or part of a loan before the scheduled due date.
Credit Score: A numerical representation of an individual’s creditworthiness, influencing the interest rates they may be offered.
