On May 20, 2025, two state-owned banks in China, Bank of Construction and Commercial Bank of Industrial and Commercial Bank of China, lowered deposit interest rates, affecting various types of products including demand deposits, time deposits, and notice deposits. After the adjustment, the one-year time deposit interest rate is below 1%.
According to the Daily Economic News reported on May 20, Bank of Construction of China lowered the deposit interest rate for Chinese Yuan on May 20. The demand deposit rate decreased by 5 basis points to 0.05%; the time deposits including three-month, six-month, one-year, and two-year periods were all lowered by 15 basis points, resulting in rates of 0.65%, 0.85%, 0.95%, and 1.05% respectively; the three-year and five-year time deposits both decreased by 25 basis points to 1.25% and 1.3%. The rates for other time deposit types were also decreased by 15 basis points. The 7-day notice deposit rate dropped by 15 basis points to 0.3%.
Bank of Construction is a state-owned bank in China. This adjustment follows the previous lowering of deposit interest rates by some commercial banks, private banks, and rural banks in April this year, as state-owned banks now join these measures.
Starting May 20, some joint-stock banks have once again lowered the renminbi deposit rates. On the same day, China Merchants Bank also lowered its deposit rates. The demand deposit rate decreased by 5 basis points to 0.05%; the time deposits of three-month, six-month, one-year, and two-year periods were also lowered by 15 basis points, with rates of 0.65%, 0.85%, 0.95%, and 1.05% respectively; the three-year and five-year time deposits both decreased by 25 basis points to 1.25% and 1.3%. Similar adjustments were made to other deposit products. The 7-day notice deposit rate decreased by 15 basis points to 0.3%.
According to the First Financial, nearly 20 banks, including Ping An Bank, Shanghai Pudong Development Bank, Anhui Xin An Bank, Shanghai Huarui Bank, Wuhan Zhongbang Bank, Guangxi Rongshui Rural Commercial Bank, Guangxi Resource Rural Commercial Bank, Xingning Pearl River Rural Bank, Neihuang Xingfu Rural Bank, and Huidong Huimin Rural Bank, have lowered interest rates on some time deposit products since April. The majority of the adjusted deposit rates are now below 2%, particularly for three-year and five-year deposits.
The reason for the widespread downward adjustment in bank interest rates is believed to be focused on reducing the cost of liabilities as a key reason for actively lowering deposit rates.
According to the latest data from the China Banking and Insurance Regulatory Commission, as of the end of the fourth quarter of 2024, the net interest margin of commercial banks was 1.52%, at historical lows.
Nijun, chief analyst of Guangfa Securities, believes that the unexpected US tariff policy has negatively impacted the economic fundamentals. It is expected that the central bank may cut reserve requirements and interest rates, but attention should still be paid to the accumulation of financial risks due to exchange rate pressures and the rapid decline in long-term interest rates.
Liu Rong, Chief Financial Officer of Bank of Construction, predicts that the net interest margin of the banking industry will face certain downward pressure in 2025.
The news has sparked discussions online. Some netizens suggest that with the current sluggish Chinese economy and people being reluctant to spend money, further lowering interest rates by banks may not stimulate consumption.
One netizen with the username “Ma Gekuo” commented: “I don’t understand the significance of state-owned banks lowering deposit rates. I know that even with lower rates, ordinary people will still deposit money in banks because saving money is not easy, and it’s kept for later use as a precaution against uncertainties.”
Another netizen named “Rise” said: “The more they lower rates, the more people save rather than spend. Everyone knows that now even the last straw, external trade, has collapsed, not to mention the real estate and stock markets.”
A netizen named “Keliu” remarked: “Based on Japan’s past experience of the ‘Lost Decade,’ simply reducing interest rates may not improve sluggish demand and weak economy. It is essential to raise the income and expectations of the majority of the population.”