Chinese banks have quietly pushed retail deposit rates lower at the start of the year, with large-denomination certificates of deposit for short tenors dipping into the “0.x” territory. Major state-owned lenders including Industrial and Commercial Bank of China, Agricultural Bank of China and Bank of China are now offering one- and three-month large CDs at about 0.9%, a notable reduction from a year earlier.
Smaller regional lenders have moved even further: several rural commercial banks in Yunnan province have listed three-month large CDs at below 1%. Five-year large CDs have largely disappeared from many banks’ mobile apps, leaving two-year and shorter products as the longest-term options visible to retail customers.
Banking analysts point to a combination of central-bank policy and internal balance-sheet management as the drivers. The People’s Bank of China has enacted structural rate cuts and reserve requirement ratio reductions, loosening funding costs; at the same time banks are trying to stabilise net interest margins by tightly managing the price and volume of relatively expensive funding tools such as large CDs.
“Large-denomination CDs are active liabilities with typically higher prices and good liquidity, so banks are inclined to manage their issuance strictly to stabilise operations and ease NIM pressure,” says Wang Yifeng, chief analyst for financials at Everbright Securities. The shift reflects a trade-off between keeping wholesale-like retail funding available and reducing interest expense.
For household savers the change is direct and unwelcome: returns on short-term, ostensibly safe products are now lower than before, nudging investors toward other yield sources. The deputy director of the National Financial and Development Laboratory, Zeng Gang, has advised households to diversify away from medium- and long-term time deposits and to match investments with risk tolerance, signalling a recognition that deposit products will not be the reliable yield anchor they once were.
The move has wider implications. Lower deposit rates compress bank margins but also lower the cost of funding for credit growth, reinforcing official efforts to stimulate the economy via cheaper liquidity. Internationally, falling domestic deposit yields may push yield-seeking capital towards higher-return assets at home—equities, shadow-banking products—or abroad, with consequences for asset prices, leverage and cross-border flows.
Regulators and banks will need to balance several risks: protecting retail confidence and preventing a rush into opaque wealth products, keeping banks’ profitability sustainable, and ensuring easier funding translates into genuine credit support for businesses. Watch for continued shrinkage in long-term deposit issuance and further downward pressure on term deposit rates if the PBOC sustains easing measures.