Deposit Interest Rates Enter 1% Range... "Stability Over Yield"
Switching Fixed Deposits to Avoid Further Rate Drops
Despite interest rates in the 1% range, deposits at Chinese banks have significantly increased. This reflects a solidifying investment tendency among Chinese people to prioritize stability over returns and focus on saving.
According to Chinese economic media Zhongxin Jingwei on the 3rd, the total deposits at China's six major state-owned banks (Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, China Construction Bank, Bank of Communications, Postal Savings Bank of China) reached 13.361 trillion yuan (approximately 24,790 trillion won) last year, marking a 12.03% increase (1.434 trillion yuan / 2,661 trillion won) compared to the previous year. Zhongxin Jingwei explained, "Based on a population of 1.4 billion, this means every person increased their savings by 10,000 yuan."
The deposits at the six major banks account for 80% of the total deposits of all 21 A-share listed banks that announced their results as of the previous day. Among them, Industrial and Commercial Bank of China had the largest deposits at 3.29856 trillion yuan, followed by Agricultural Bank of China with 2.844 trillion yuan, China Construction Bank and Bank of China with 2.722 trillion yuan and 2.26 trillion yuan respectively.
Among other joint-stock companies, China Merchants Bank recorded 816 billion yuan, followed by China CITIC Bank and Industrial Bank with 540 billion yuan and 514 billion yuan respectively. Based on growth rate, Ruifeng Bank and Changshu Bank led with deposit increases of 16.60% and 16.16% year-on-year, ranking first and second.
At the end of last year, deposit interest rates at some banks including state-owned banks entered the 1% range. Industrial and Commercial Bank of China was at 1.89%, Bank of China 1.83%, Agricultural Bank of China 1.78%, China Construction Bank 1.77%, China Merchants Bank 1.62%, and Postal Savings Bank of China 1.53%. Even the bank with the lowest rate, Postal Savings Bank of China, saw its deposits increase by 9.76% year-on-year to 1.395559 trillion yuan.
Some investors are switching to fixed deposits to avoid the impact of the recent trend of interest rate cuts. Fengpai News diagnosed, "The proportion of some long-term personal fixed deposits is increasing," adding, "As a result, banks' average cost ratios are rising."
Due to the impact of loan interest rate cuts, the net interest margin (NIM) of banks in the fourth quarter of last year was 1.69%, down 0.04 percentage points from the previous quarter. As of the end of last year, the weighted average interest rate on new corporate loans in China was 3.75%, the lowest on record. Due to management difficulties, some banks have drastically cut salaries and even demanded the return of already paid bonuses.
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