Mainland banks have been told by authorities to lower saving rates in wake of “huge inflows” into savings and deposits accounts.
Members of China’s “interest rate self-regulatory mechanism,” mostly banks, met this month and were urged to lower deposit rates, according to two attendees and two other bank sources who were closely briefed on the meeting.
The guidance comes as banks and the economy groan under the weight of the huge inflows and businesses grapple with debt risks, structural woes and a slowing global economy.
One of the country’s “big four” state lenders plans to start cutting certain personal and corporate rates from next week, another person briefed on the plans said. Products to be affected include “call deposits” and “agreement deposits”.
Other people familiar with the meeting said the mechanism asked for a roughly 10-basis-point cut to weighted average term deposit rates in the quarter from a year earlier and some banks were asked to dial back high-yield deposit products.
Meanwhile, major state-owned lenders and insurers have jointly created a fund believed to be providing special support to financial institutions at risks, another sign showing economic uncertainty.
It came after Chinese Premier Li Qiang emphasized the use of quality development to resist external uncertainties at a State Council study session on Monday. A total of 11 state-backed life insurers poured in a total of 33.9 billion yuan (HK$38.6 billion) to register the Jiuzhou Qihang Fund in partnership with a unit controlled by Shenzhen government, mainland media reported.
The 11 founders are China Life (2628), the life insurance subsidiaries under China Pacific (2601), China Taiping (0966), PICC (1339), China Merchants Group, and those under the six major state-owned banks, namely Industrial and Commercial Bank of China (1398), China Construction Bank (0939), Agricultural Bank Of China (1288), Bank of China (3988), Bank of Communications (3328), Postal Savings Bank of China (1658). The insurers’ fund could serve to reduce the risks facing some financial institutions, mainland media cited experts as saying. Earlier in 2021, 18 insurers injected 14.8 billion yuan to set up a private equity fund and invest in a bad-debt manager China Huarong (2799).