After state-owned banks and joint-stock banks successively lowered deposit interest rates, many city commercial banks, including Bank of Beijing, Bank of Jiangsu, Bank of Changsha, and Bank of Shanghai, followed suit and reduced their listed deposit interest rates. Following this adjustment, the listed interest rates for time deposits of some city commercial banks are now basically the same as those of most joint-stock banks, with the five-year interest rate for lump sum deposits and withdrawals now within 1.7%.
On May 20th, the six major state-owned banks, namely Industrial and Commercial Bank of China, 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 interest rates. After the major state-owned banks took the lead, national joint-stock banks promptly followed suit. Recently, regional banks have also acted swiftly. A reporter learned from the official website of Bank of Beijing that since May 27th, the bank has implemented a new listed deposit interest rate. After the adjustment, the listed interest rates for one-year, two-year, three-year, and five-year fixed deposit and withdrawal of this bank have been adjusted to 1.15%, 1.20%, 1.30%, and 1.35% respectively, in line with those of several joint-stock banks such as China Everbright Bank and China CITIC Bank. In addition, more than ten banks, including Yangling Rural Commercial Bank, Zhaoqing Rural Commercial Bank, Anxiang Rural Commercial Bank of Hunan Province, and Bohai Bank, have also issued interest rate adjustment announcements, announcing interest rate cuts.
The market was not surprised that small and medium-sized banks followed suit in cutting interest rates one after another. Generally speaking, the reduction of deposit interest rates is transmitted along the path of large commercial banks – joint-stock commercial banks – small and medium-sized banks. Dong Ximiao, chief researcher of China UnionPay, said that due to differences in market competition, customer positioning, liability structure, and other factors, different commercial banks adjust the pace and extent of deposit interest rate adjustments. Due to factors such as brand image, small and medium-sized banks have relatively weak deposit-taking capabilities. In the past, they generally attracted customers with higher interest rates, so there is more room for interest rate cuts.
The decline in deposit interest rates is both an inevitable trend and an active move. Experts say that in recent years, with the fluctuations of the economic cycle, the return on investment of various assets has declined, and the risk-free interest rate has been in a downward channel. The decline in deposit interest rates is a natural phenomenon in the era of low interest rates.
Lou Feipeng, a senior researcher at Postal Savings Bank of China, told reporters that to reduce the financing costs of the real economy, it is necessary to lower loan interest rates. The decline in loan interest rates further increases the downward pressure on banks’ net interest margin, which requires lowering the cost of liabilities. As deposits are an important source of liabilities for banks, it is necessary to lower deposit interest rates to stabilize the net interest margin and enhance the sustainability of banks’ services to the real economy. The simultaneous reduction of deposit interest rates by different types of banks not only helps to better stabilize the net interest margin of banks but also helps to better lower the financing costs of the real economy.
The latest data from the Financial Regulatory Authority shows that by the end of the first quarter of 2025, the net interest margin of commercial banks was 1.43%, down 9 basis points from the end of 2024.
In the face of the current low-interest-rate environment, the trend of deposit relocation is increasingly evident. According to the data from the central bank, in April alone, the deposits of the household sector decreased by 1.39 trillion yuan, while non-bank deposits increased significantly during the same period. The deposits of non-banking financial institutions rose by 1.57 trillion yuan, an increase of 1.90 trillion yuan year-on-year.
In 2020, if I saved 1 million, the five-year interest rate could be 4% to 5%. Now it’s much lower. A depositor in Beijing told a reporter that when she recently withdrew her due deposit, she found that the current fixed interest rate started with “1,” and the interest on a five-year deposit of one million yuan had shrunk by two-thirds.
It is worth noting that currently, money market funds, bond funds, and gold funds are becoming the “new three gold funds” for investors to replace deposit savings. Data released by Ant Fortune shows that as of the end of April 2025, 9.37 million people born in the 1990s and 2000s have simultaneously allocated funds to Yu ‘E Bao money market funds, bond funds, and gold funds.
As deposit interest rates decline, the yields of asset management products fall, and residents’ expectations improve, the attractiveness of the wealth management market and the capital market may further increase. Dong Ximiao said that, in general, investors should balance the relationship between risk and return, as well as the short term and the long term, to make comprehensive asset allocation. If one hopes to obtain higher returns, then one should undertake higher risks. If one does not wish to undertake higher risks, then one should accept lower returns. If investors pursue stable returns, they can appropriately allocate cash management wealth management products, money market funds, government bonds, insurance, and other products in addition to deposits.
Xue Hongyan, the vice president of Xingtu Financial Research Institute, believes that ordinary investors can manage their funds in a classified manner based on their capital needs. For instance, the money needed within one year can be prioritized to be deposited in a small bank with a slightly higher interest rate for a one-year fixed deposit. The pocket money can also be placed in a money market fund and withdrawn at any time. For money that is not needed for 1 to 3 years, one can consider purchasing government bonds or opting for stable and low-risk bank wealth management products. For long-term spare money that won’t be needed within three years, you can try regular investment in index funds with a small amount each month. In the long run, the returns may be higher than savings, but at the same time, you should also be mentally prepared for short-term fluctuations.
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