In recent months, China’s six major state-owned banks have successively removed five-year large-sum certificates of deposit and lowered the interest rates on three-year deposits, sparking widespread discussion in society. Industry experts believe that this is not just a simple product adjustment, but rather a forced choice by banks due to rapidly narrowing interest rate spreads, rising risks, and difficulties in asset recovery. Depositors have expressed concerns that this move reflects the banks’ pessimistic outlook on the future medium to long-term economic environment and may further weaken public confidence in the financial system.
According to reports from mainland China media, the banking apps of the six large state-owned banks – Industrial and Commercial Bank of China (ICBC), Agricultural Bank of China (ABC), Bank of China (BOC), China Construction Bank (CCB), Bank of Communications (BoCom), and Postal Savings Bank of China (PSBC) have removed the five-year large-sum certificates of deposit, with the three-year deposit rates generally reduced to 1.5% to 1.75%. Many joint-stock and small to medium-sized banks have followed suit by adjusting and reducing high-interest long-term savings products.
Banking industry insiders explain that due to continuously decreasing loan interest rates, the shrinking of asset-side income for banks has intensified, making it more difficult for them to bear the risks of long-term commitments with high interest rates.
A bank trader in Shanghai revealed, as reported by Reuters, that the net interest margin for banks has fallen to a historic low of 1.42%.
American economist David Huang pointed out that the withdrawal of high-interest long-term deposits by banks is not just a single operation but a signal that there is a “structural profitability problem” in the Chinese banking system, forcing banks to take self-rescue measures.
He analyzed that banks are facing three layers of pressure: firstly, the interest rate spread has been compressed to a dangerous level, where “banks might actually lose money by attracting deposits”; secondly, to avoid mismatches in terms and reverse interest rate risks that could lead to systemic risks, banks are compelled to shorten liability maturities and reduce liability costs; thirdly, this is also to prepare for potential bank mergers, reorganizations, or bankruptcies in the future, as “long-term high-interest liabilities will become a huge burden”.
As a result of the operational adjustments by banks, the impact on regular depositors is particularly direct. Mr. Chen, a depositor from Henan, expressed that while it may appear that banks are canceling five-year deposits, it actually reflects a “very pessimistic” outlook on the economic and investment environment for the next three to five years.
Mr. Chen mentioned in an interview that banks have professional teams internally who adjust fund allocations based on economic trends. He stated that long-term high-interest liabilities pose risks to banks, especially when there is a lack of stable and profitable investment channels currently available.
Regarding alternative options for depositors to consider, he candidly admitted to a sense of pessimism. From his observation, most households are burdened with mortgages or other debts, with limited actual savings; business owners have their funds tied up in operations; corrupt officials are hesitant to hold money due to policy uncertainties, which means there is not a wide group with freely allocatable assets.
He suggested that foreign currency could be used as a hedge against renminbi depreciation, while precious metals could serve as a means to preserve assets. However, overall, there are no ideal and low-risk investment options domestically. “Being able to preserve capital is already a relatively conservative and realistic choice,” he added.
Mr. Chen further noted that banks have been reducing the number of branches and operating hours, canceling weekend services, partly due to shrinking savings volumes and difficulties in fund recovery. “A large amount of funds previously invested in real estate cannot be easily recovered, putting pressure on fund turnover and operating costs for banks.” He speculated that these circumstances resemble the period prior to the collapse of the Henan Rural Commercial Bank and may not be isolated incidents.
In contrast, investment-savvy depositors with a certain asset size and channels have shown different ways of coping. An investment-savvy depositor from mainland China, Mr. Wang (pseudonym), has diversified his funds across domestic banks, Hong Kong stock accounts, and securities platforms for a long time.
He believes that the removal of large-sum certificates of deposit by banks is a common response to the overall financial environment tightening.
Reflecting on his past experiences during an interview with Epoch Times, Mr. Wang recalled that mainland residents were more easily able to apply for Hong Kong stock accounts and open overseas bank accounts remotely a few years ago, even being able to invest through digital banks like UK’s iFast. However, as policies have become stricter, the platforms now require proof of overseas residency, making it impossible to solely rely on bank statements.
In light of these changes, some funds have shifted to foreign banks like HSBC China and Standard Chartered China. He analyzed that deposits with foreign banks in China also enjoy the People’s Bank of China’s RMB 500,000 deposit insurance, but compared to state-owned banks, they are seen as “more stable”, with higher USD fixed deposit rates which are attractive.
Legally moving funds overseas has become more restricted. Mr. Wang mentioned that individuals can still open virtual bank accounts online in Hong Kong by physically going to Hong Kong, such as through digital platforms like Zhongan, Stars Digital, Ant Bank, and then transfer funds to other countries. With Hong Kong’s opening of “cross-border payment pass”, mainland funds can be transferred to Hong Kong accounts without fees, where offshore RMB rates are higher, becoming a kind of alternative wealth management method.
However, he admitted that the costs and thresholds for overseas allocations have been rising, with Hong Kong’s HSBC planning to charge HKD 100 monthly for assets below HKD 10,000 starting in 2026. It’s been noted that emerging foreign banks like Commonwealth Bank of Australia have begun attracting Chinese customers.
Nevertheless, “residents in mainland China are no longer willing to buy domestic stocks, funds, or other financial products,” Mr. Wang added.
Official data reveals that the phasing out of large-sum certificates of deposit by banks also reflects insufficient overall economic momentum. China’s total social retail sales of consumer goods in November increased by only 1.3% year-on-year, hitting a new low since the end of strict “zero-COVID” measures in December 2022.
In terms of lending, new loans in November 2025 amounted to only around RMB 390 billion, significantly dropping by over 80% from around RMB 2.2 trillion in October and more than 92% from the RMB 1.29 trillion in September. This sharp decline is primarily due to weak demand for family sector loans, especially a substantial shrinkage in short-term loan demands.
Reuters reported that several financial institutions predict that China will start cutting interest rates in 2026, with analysts from Citigroup, ING, among others, believing that the monetary policy will switch to accommodative in early next year. This rate cut may further squeeze bank interest spreads, serving as another force for banks to adjust their deposit structures in advance.
The China Postal Savings Bank’s securities department anticipates that the People’s Bank of China may cut rates by 20 basis points in the first half of next year, while CITIC Futures predicts a reduction of 10 to 20 basis points in 2026.
A banker in Shanghai told Reuters that if loan rates are further lowered in the future, the net interest margin for banks, which has already plummeted to a historic low of 1.42%, will be further tightened, making it even harder for banks once mortgage rates decline next year.
Amidst banks tightening on the liability side and the inability to improve the investment side, Huang warned that the impacts on the general public are often underestimated. He pointed out that firstly, there is a decrease in depositors’ sense of security as yields continue to decline; “Money flows back to banks not because they trust the banks, but because the entire Chinese investment market is in a very dire situation.”
He cited examples such as the stock market being a long-term tool for privileged individuals to make money, real estate no longer being a viable investment, and private enterprises currently facing declining conditions.
Huang further cautioned that “when the entire public opts for very low returns just to preserve capital, it will affect consumption and entrepreneurial intentions.”
Moreover, he mentioned that there could be further wealth differentiation in the financial structure. Those with assets and channels may seek returns through overseas allocations or non-standard methods; whereas ordinary families may have to settle for low returns or even negative interest rates on deposits, exacerbating class stratification and wealth solidification.
Thirdly, Huang believed that the banks’ cancellation of large-sum certificates of deposit is essentially a policy to “indirectly lower the overall capital return rate for the public”, making residents bear the burden of hidden wealth transfer and further compressing the overall market economy vitality.
Additionally, Mr. Chen also noted the cases of depositors facing strict scrutiny when withdrawing funds in recent years, leading to public dissatisfaction. “In order to slow down fund outflows, banks are forced to set up obstacles, which, although a last resort, indeed weaken everyone’s trust.”
From the comprehensive exit of large-sum certificates of deposit, to depositors seeking alternative assets, to the pressure faced by banks on interest spreads and asset-side recovery difficulties, he believed that with various pressures accumulating, “the banking system itself is becoming a high-risk financial place.”