China’s mainland banks are rapidly shrinking the maturity of their debts at an unprecedented speed, causing a rare phenomenon in the financial market: the once widely regarded five-year fixed-term deposit, considered a cornerstone of savings, is quietly being removed from the product lists of many banks, including the six major state-owned banks in China. Even three-year products are starting to disappear, with the longest-term large amount certificates of deposits currently available only offering a one-year term. This “exit wave of long-term products” directly exposes banks’ deep anxiety towards locking in long-term high-cost liabilities in an environment of continuous interest rate decline.
The five-year fixed-term deposit, once commonly seen in banks, is quietly vanishing from the product lists of some banks.
On November 25, Jiu Pai News reported that all six major state-owned banks in China have already shelved the five-year large amount certificates of deposits.
Not long ago, the Inner Mongolia Tuyou Banner Mengyin Township Bank not only lowered its deposit interest rates but also officially announced the cancellation of the five-year fixed deposit. In the latest deposit interest rate announcement of Inner Mongolia Kundulun Mengyin Township Bank, the column for the interest rate of the five-year fixed deposit product is already shown as blank.
Hubei Jingmen Rural Commercial Bank also quickly followed suit by lowering its fixed-term deposit rates this month, and its special product “Fumancun” starting from 500,000 yuan is no longer being offered.
In fact, this “exit wave” has spread to many banks, including Zhejiang Netcom Bank, Zhongxin Baixin Bank, Suining Bank, and Zhongguancun Bank, which no longer offer the five-year fixed deposit through mobile banking apps. Some banks have even shelved their three-year products.
Zhongguancun Bank stated in the deposit product interest rate adjustment announcement that the three-year and five-year whole certificate of deposit products have all been shelved, and only existing customers can continue to hold them in case of automatic renewal.
Regarding this phenomenon, financial blogger “Liu Da” analyzed on November 25, that the direct shelving of products is more radical than the past “inverted interest rates” (where the five-year rate is lower than the three-year rate), clearly indicating that banks are extremely eager to maintain flexibility on the liability side and are reluctant to lock in any long-term high-cost fund risks.
The core reason behind banks suddenly shrinking long-term deposit products directly points towards the continuous pressure on Net Interest Margin (NIM) in the banking industry. NIM is a critical indicator measuring a bank’s core profitability and operational safety.
An article by the Netease Big V “Xiao Tan Shi Ke Cuisine” on November 25 stated that the difference between loan rates and deposit rates is the cornerstone of bank profits. However, looking at the third-quarter reports already disclosed by listed banks this year, the trend of NIM being squeezed continues, with nearly half of the banks still in a downward channel.
Data from Wind showed that among the 26 listed banks that have disclosed third-quarter NIM data, 12 banks have achieved stable or increased NIM compared to the previous quarter. Although the stabilization trend is evident, there are still 14 banks whose NIM is on a downward path.
It is widely believed in the industry that a NIM of 1.8% is the safety warning line for bank operations. However, currently, the average NIM of domestic banks is less than 1.5%, with the NIM of large state-owned commercial banks as low as 1.31%, and individual large banks even at around 1.21%, the profit margin is severely squeezed, approaching a “danger line.”
“Liu Da” believes that this pressure stems from continued policy guidance on the decline of loan rates to stimulate the economy. However, the reduction in deposit rates is relatively slow, making it difficult for banks to sustain the traditional interest rate difference model of “low-interest deposits and high-interest loans.”
Dong Ximiao, Chief Researcher at Zhonglun, told mainland media that banks adjusting the issuance plans of large amount certificates of deposit and fixed-term deposits by compressing the scale or removing products aim to reduce deposit rates, lowering the cost of liabilities, to maintain the increasingly thin NIM.
The act of banks shelving long-term deposits is interpreted by the market as a crucial internal professional judgment: clear expectations about future interest rate trends.
“Liu Da” pointed out that banks are voting with actions, signaling to depositors that future interest rates will only be lower than they are now.
He stated that banks choose to give up locking in long-term funds out of concern that with future interest rate cuts, the five-year deposits currently absorbing at relatively high rates will become a “losing business.” Therefore, banks prefer to shorten the fund term to one year to ensure the speed of adjusting liabilities, avoiding being locked into long-term fixed costs.
In addition to adjusting deposit rates on the liability side, banks are also showing anxiety in asset-side management and risk control. Recently, many mainland banks have actively sold properties, quickly getting rid of distressed properties and mortgaged houses on hand.
“Liu Da” expressed that banks’ direct actions of selling properties also reveal their pressure and anxiety. The sole purpose of banks is to quickly recover cash flow, even if it means “cutting losses.”
Regarding overdue loan customers, the attitude towards debt collection has become milder. As long as customers maintain slow repayments, such loans will not immediately be classified as bad debts on the bank’s accounts, thereby reducing the bank’s on-paper pressure and financial burden.
“Liu Da” stated that looking at the series of actions taken by banks, from canceling long-term fixed-term deposits, narrowing NIM, to the rapid selling of properties, they all convey a clear signal: we have entered an era of continuous decline in deposit rates. The risk-free returns on future deposits will become increasingly lower, and choices will become more limited.
He concluded by saying that the crux of macroeconomic problems no longer lies solely in interest rates, but in insufficient demand and confidence. With multiple constraints such as uncertain future income for residents, low investment in social security, and a declining real estate market, relying solely on monetary policy (such as interest rate cuts) to stimulate consumption and investment has reached the margin of diminishing returns.
In this interest rate-cutting cycle, “Liu Da” offered counterintuitive financial advice: if you have idle long-term cash on hand, it is actually advisable to quickly lock in a longer-term deposit product while there are still relatively long-term options available.
Although current long-term rates may not be as high as short-term rates (in an inverted trend), in the background of banks forecasting continuous future rate decreases, locking in long-term rates now will be a prudent choice to secure relatively high-risk-free returns for the next few years.