After a landmark decision by China’s biggest banks this week to slash one-year deposit rates below 1 per cent for the first time, households across the country are grappling with a pressing question: where should they park their money?
The dilemma arose for risk-averse savers after six major state-owned lenders and leading joint-stock bank China Merchants Bank (CMB) announced on Monday they would cut their one-year fixed deposit rate to 0.95 per cent, eliminating what was once a safe, if modest, source of passive income.
Smaller banks have followed suit, trimming rates across maturities, albeit to a smaller degree. Their one-year rate stands at 1.15 per cent, while three-year rates are at 1.3 per cent.
For millions of Chinese families, the decline in deposit yields makes an already challenging financial landscape all the more slippery. Households are wracked with economic uncertainty while facing weak income prospects and a lack of attractive investment options.
“Since the rate cuts, we’ve seen a surge in clients asking what to do next. Many lament that the days of relying on bank deposits for steady returns are over,” said Liu, a client manager at a Shanghai branch of CMB who requested partial anonymity.
The move, the seventh such adjustment among China’s leading banks since September 2022, officially ushered the country’s deposit rates into the sub-1 per cent era.
