Bold reality: major Chinese banks are slimming down high-yield, long-term deposit products to ease margin pressure and protect lending activity.
In a move aimed at trimming costs, several large banks have stopped offering five-year, high-yield certificates of deposit (CDs). Institutions such as the Industrial and Commercial Bank of China (ICBC) and Agricultural Bank of China (AgBank) now list only shorter-term, large-scale CDs on their mobile apps, spanning from six months to three years.
Interest rates on these shorter-term products run roughly 1.2% to 1.8%, compared with the roughly 2% to 2.1% offered by the previous five-year CDs. Neither ICBC nor AgBank responded to Reuters’ request for comment.
This shift comes as Chinese banks grapple with narrowing profit margins amid government urges to bolster a slowing economy. Lower deposit rates give banks more room to cut lending rates, potentially supporting credit growth.
Official data show that net interest margins (NIMs) for Chinese commercial banks reached a record-low 1.42% at the end of Q3, unchanged from the prior quarter. Margin pressures are even more acute for smaller banks, which had already begun adopting similar measures.
Earlier, several rural banks in Inner Mongolia and Yunnan halted five-year fixed deposits and reduced rates on shorter-term products. In May, state banks also trimmed deposit rates as authorities cut benchmark lending rates to cushion the economy from the trade headwinds with the United States.
Despite repeated deposit-rate reductions in recent years, consumer savings in China remain robust, fueling concerns about the broader impact of lower returns on households, who often build sizable safety nets.
Reporting by Ziyi Tang and Ryan Woo; Editing by Thomas Derpinghaus
