Today’s Focus: Unable to survive, mainland China is seeing a surge in the exodus back to hometowns, authorities are on high alert for potential unrest; six major state-owned banks in China signal a rate cut by withdrawing five-year deposits; the French government has applied for a three-month suspension of operations for the Chinese e-commerce platform Shein.
As the year-end approaches, migrant workers in various regions of mainland China are returning to their hometowns ahead of schedule, causing great concern among the top Communist Party officials. They fear that unemployed migrant workers may erupt in protests under the pressure of life. An official from Hunan revealed that local authorities on the district and county levels have received notices urging grassroots organizations to monitor and “strengthen the monitoring of the public opinion of returning migrant workers,” identify dissatisfaction, and prevent group incidents.
Recently, a large number of migrant workers in Guangdong, Hunan, Hubei, Anhui, and other provinces have returned to their hometowns early. Some migrant workers have posted news of unemployment on social platforms, stating that they are bidding farewell to the cities and returning to their hometowns in search of survival.
On November 13, the Ministry of Agriculture and Rural Affairs of the Communist Party of China held a meeting in Yunnan, emphasizing the importance of maintaining the scale of migrant workers lifted out of poverty and urging localities to “continue to do a good job in the special action of returning home and promoting employment for people lifted out of poverty, to prevent large-scale stagnation in returning to the countryside.”
Mr. Huang, a senior media figure in mainland China and a former reporter for the Communist Party newspaper, stated in an interview with Dajiyuan that the large-scale return of migrant workers poses a potential threat to the current social order, hence the Communist Party regime is taking measures to prevent it. He mentioned that in the past, migrant workers returning home for the Chinese New Year could be seen as joyous because they had earned money in cities that they couldn’t earn in rural areas. However, the current situation is different. Now, the migrant workers are returning with feelings of disappointment, anxiety, and helplessness. They are not just going home for the holiday but rather because they couldn’t find work in the cities and were forced to return to their villages. The authorities are aware of this, which is why they believe that the influx of migrant workers back to their hometowns could pose a potential threat to the regime, leading them to take strict preventive measures.
An insider in Hunan who preferred not to disclose their name told Dajiyuan that after receiving instructions from higher authorities a few days ago, they started registering and visiting the returning personnel to understand their sources of livelihood and family pressures. The insider stated, “Tens of millions of migrant workers are returning home for the Chinese New Year, and some of them couldn’t find work in the cities. Returning to the countryside, they have even fewer opportunities for employment. Local authorities on the district and county levels have already been notified to ‘strengthen the monitoring of the public opinion of returning migrant workers’ and to prevent group incidents.”
The insider also mentioned that they cannot effectively resolve specific problems. For example, in Changde area of Hunan, returning personnel found that the land they originally leased had been sublet, and due to the complex arrangements for land transfers, “these migrant workers couldn’t ask the lessees to terminate the contracts.” They also gave examples of returning workers in Yueyang and Yiyang reporting land issues to the village councils and requesting them to intervene for farming purposes, but the village councils were unable to coordinate and resolve the issues.
Ms. Li, a resident of Niutun Town, Huaxian County, Anyang, Henan, expressed that the young and strong farmers had long left their village, and even upon returning to the countryside, they were reluctant to engage in farming. She said that they went to cities for work and only returned during the holidays to visit their parents. The land in their households had already been transferred, and now upon returning, they couldn’t find any opportunities to work.
Informants suggested that a large population is currently stuck in a dilemma of “unable to return to the city, unable to survive in the countryside.” The government is very fearful of this situation, worrying that these individuals with limited options might cause trouble. It was added that historical political upheavals in China often began in rural areas, and the current rural areas have conditions conducive to initiating “group protests.”
In recent times, many mainland Chinese citizens have noticed that the commonly seen five-year fixed-term deposits in banks are disappearing from the product lists of some banks. This trend is gradually expanding, moving from small to medium banks to the six major state-owned banks in China.
According to a report by Jiupai News on November 25, all six major state-owned banks in China have already withdrawn five-year large-sum deposits.
Not long ago, during a deposit rate adjustment by the Yongzhen Town Bank in Tuiqi, Inner Mongolia, they announced the cancellation of five-year fixed-term deposits. Following this, the “exit trend” of five-year deposits began spreading from small and medium banks to commercial banks. Presently, even the six major state-owned banks in China are unable to sustain the trend.
Many are puzzled by this development, questioning why the public was previously encouraged to deposit money for the long term but is now seeing a reverse in this practice.
Regarding this matter, financial blogger “Liu Da” analyzed and mentioned that the direct withdrawal of products is more radical than the previous “interest rate inversion,” where the interest rates on five-year deposits were lower than the three-year ones. This indicates that banks are extremely eager to maintain the flexibility on the liability side and are reluctant to lock in any long-term, high-cost fund risks.
Another blogger, “Xiao Tan Shi Ke Mei Shi,” stated in a post on NetEase that the difference between loan rates and deposit rates is the cornerstone of bank profitability. However, based on the third-quarter reports disclosed by listed banks this year, the net interest margin remains under pressure, with nearly half of the banks still on a downward trajectory.
Industry experts believe that a net interest margin of 1.8% is considered a safety warning line for banking operations. Yet, the average net interest margin at domestic banks is currently below 1.5%, with state-owned large commercial banks having a net interest margin as low as 1.31%, and some major banks even as low as 1.21%. This indicates that the banks’ profit margins are severely compressed and are nearing a “danger line.”
“Liu Da” believes that to stimulate the economy, the authorities have been continuously guiding downward for loan rates. However, the reduction in deposit rates is comparatively slower, potentially causing a challenge to banks in continuing the traditional interest rate differential model of “low-interest deposits, high-interest loans.”
Regarding the withdrawal of long-term deposits by banks, “Liu Da” pointed out that banks opting to forego fixed long-term funds are concerned that during future rate reduction cycles, the five-year deposits absorbed at relatively high rates could become a “loss-making business.” Hence, the banks prefer shortening the fund term to one year to ensure the flexibility of liability adjustments and avoid being locked into long-term fixed costs.
Furthermore, in recent times, many mainland banks have displayed anxiety on the asset side and risk control, swiftly selling off properties such as defaulted houses and mortgaged properties.
“Liu Da” observed that banks’ direct selling of properties reveals their pressures and anxieties. The banks’ singular aim is to quickly revert their cash flow, even if it means resorting to radical measures such as “cutting losses.”
In terms of overdue loan clients, banks have shown a more lenient attitude on collections. As long as clients maintain a slow repayment rhythm, the loans will not be immediately classified as bad debts in the bank’s books. This approach helps alleviate the bank’s financial pressures and reporting burden.
“Liu Da” expressed that from the cancellation of long-term deposits, continual narrowing of net interest margins to quick property sell-offs, banks are conveying a clear message. That is, “We have entered an era of continuous decline in deposit rates. The risk-free returns on deposits in the future will become increasingly lower, and choices will dwindle.”
“Liu Da” concluded that the crux of macroeconomic problems no longer solely lies in the interest rates but in insufficient demand and confidence. With multiple constraints such as uncertain future incomes for residents, low social security investments, and a declining real estate market, relying only on monetary policies like rate cuts to stimulate consumption and investment is approaching the limits of effectiveness. It was suggested that those with long-idle funds should secure long-term deposit products while they are available with longer terms being preferable.
A French official from the Ministry of Finance revealed that the French government will file an application with the Paris Court on Wednesday, November 26, requesting the temporary suspension of operations for the Chinese e-commerce platform Shein in France for three months. The reason behind this action is due to the presence of adult-like dolls resembling children and the sale of prohibited weapons on the Shein platform.
According to a report by Reuters, as early as November 5, Shein had already shut down the “marketplace” section in the French region. Previously, this section was used by third-party sellers. However, Shein’s in-house sales of clothing were unaffected and continued operating normally.
It is reported that the reason the French government resorted to special judicial procedures was in a bid to pressure Shein by imposing a three-month suspension, compelling them to enhance their product scrutiny.
The Paris Court will hold a hearing on Wednesday to deliberate on the government’s accelerated judicial process. The official from the Ministry of Finance mentioned that the court would not reach a decision on that day, and the final judgment would come weeks later.
Under Article 6.3 of the French “Digital Economy Law,” judges can take measures to prevent harmful online content from spreading further. The court will have to assess whether suspending Shein for three months is necessary. Additionally, they will consider if this decision breaches any EU regulations.
Per EU rules, platforms are not directly liable for third-party infringing products but must promptly take down any items known to be problematic.
The French Ministry of Finance official pointed out that Shein possesses the necessary technology and means to review products, yet the platform failed to fulfill this responsibility.
Furthermore, the French government has summoned major network service providers such as Free, Orange, and SFR to attend the hearing. In the event that the court rules for suspension, they hope the providers can block access to the Shein website.
Moreover, the French government is pushing the European Commission to initiate a formal investigation into Shein.
Apart from Shein, French regulatory authorities are also investigating other e-commerce platforms, including AliExpress, Wish, and Temu.