Many banks in Mainland China have seen their deposit rates fall below “1”, leading to the disappearance of the once-enthusiastic rush for large-sum deposits. As a result, many depositors with maturing fixed deposits are feeling anxious. For example, a depositor said that for a 1 million yuan deposit, the interest over three years has shrunk from 105,000 yuan to 39,000 yuan, foreseeing a “cliff-like drop” in future interest income.
On May 20, the six major state-owned banks, including Industrial and Commercial Bank of China (ICBC), Agricultural Bank of China, Bank of China, China Construction Bank, Bank of Communications, and Postal Savings Bank of China, as well as China Merchants Bank, simultaneously lowered their deposit rates. The one-year term deposit rate plummeted below 1% for the first time to 0.95%, while the demand deposit rate dropped to 0.05%. Over the past week, a dozen small and medium-sized banks have followed suit with rate cuts, pushing the highest fixed deposit rate below 1.7%.
Some banks concurrently lowered the rates on large-sum deposits and shelved products with maturities of over two years. Currently, the rates on large-sum deposits at major banks mostly do not exceed 1.4%. Even after rate cuts by some private banks, the highest rate for eligible large-sum deposits has only reached 1.65%.
Commercial banks have swiftly followed suit. National joint-stock commercial banks, such as China CITIC Bank, China Minsheng Bank, Bank of Communications, China Everbright Bank, China Huaxia Bank, Industrial Bank, and Ping An Bank, have all adjusted their one-year term deposit rates to 1.15%, two-year term deposit rates to 1.2%, three-year term deposit rates to 1.3%, and five-year term deposit rates to 1.35%.
Several small and medium-sized banks have also joined the latest round of rate cuts. For example, Yangling Rural Commercial Bank announced on May 21 a reduction in the listed rates for Renminbi deposits, with rates for one-year fixed deposits dropping to 1.1%. The rates for two-year, three-year, and five-year fixed deposits are 1.2%, 1.3%, and 1.3% respectively, marking the widespread entry into the “era of 1%”.
In addition, according to incomplete statistics, over the past week, more than ten banks, including Zhaoqing Rural Commercial Bank, Yangling Rural Commercial Bank, Hunan Anxiang Rural Commercial Bank, and Bohai Bank, have announced adjustments in their interest rates, officially announcing rate cuts. Following the adjustments, the rates for one-year fixed deposits generally range from 1.1% to 1.2%, and the highest fixed deposit rate does not exceed 1.7%.
This has led many depositors with maturing fixed deposits to become anxious. A depositor named Huang Yuan (pseudonym) from Fujian has two deposits maturing in June with interest rates around 3.5%. For her, the future returns on these deposits are expected to experience a “cliff-like drop”, with the interest on a 1 million yuan deposit shrinking from 105,000 yuan to 39,000 yuan over three years.
“Having deposited 1 million three years ago, the interest was enough to buy a car; now, after three years, the interest will only cover three years of fuel,” Huang Yuan said. She plans to check several banks upon maturity, but most likely will stick with deposit products.
Given that the Chinese people have experienced years of poverty and are concerned about the uncertainty of China’s future economy, a high savings rate has become a deeply ingrained habit. The average savings rate per capita in China has stayed above 30% for a long time and even reached highs of over 50%. Large-sum deposits at banks have been favored by the public.
However, against the backdrop of falling interest rates, bank products like large-sum deposits and notice deposits offering “high returns” have lost their appeal. Following the adjustments in the listed rates, several major banks have shelved large-sum deposits with maturities of two years or more, and the rates have been lowered concurrently.
Currently, Chinese banks no longer offer deposit products with maturities of over two years.
Apart from the major banks, “high-return” products like large-sum deposits at private banks, which were deemed as the “high-rate territory”, have also undergone adjustments. On May 25, Zhongbang Bank only had one-month, three-month, six-month, nine-month, and one-year large-sum deposit products available, with the highest rate at 1.65%. Last year, the bank’s large-sum deposit rate had once exceeded 3%.
Against this backdrop, the previous fervor for large-sum deposits has faded. One depositor mentioned, “There’s no longer a rush for large-sum deposits recently because the rate differences are not that significant.”
He noted that due to the lack of sufficiently attractive products, the large-sum deposit community he is a part of hasn’t discussed related topics for a long time.