Multiple Chinese Banks Cut Deposit Rates, Entering the “1 Era”

Recently, many commercial banks in China, including large state-owned banks and smaller banks, have successively lowered their deposit interest rates by 10 to 50 basis points (BP). Currently, the interest rates for most banks’ fixed-term deposits are generally below 2%, signaling the arrival of the “era of 1%.”

According to a report from “First Financial” on April 14th, a staff member at a Ping An Bank branch in Shenzhen revealed, “Last week, we just finished a round of deposit rate cuts, and most rates are now below 2%.” The bank’s “Ping An Cun” product saw its three-year fixed deposit annual interest rate reduced from 2.05% to 1.65%, a decrease of 40 basis points. Similarly, a special three-year fixed deposit product at a branch of the Huaxia branch of the Bank of Communications in South China also decreased from 2.15% to 2.05% starting from April 7th, a reduction of 10 basis points.

According to incomplete statistics from the media, starting from April, nearly 20 banks such as Anhui Xin’an Bank, Shanghai Huarui Bank, Wuhan Zhongbang Bank, Guangxi Rongshui Rural Commercial Bank, Guangxi Ziyuan Rural Commercial Bank, Xingning Pearl River Village Bank, Neihuang Xingfu Village Bank, and Huidong Huimin Village Bank have also lowered the interest rates of some fixed-term deposit products. This round of adjustments mainly focuses on three and five-year term deposit products, with most bank deposit rates now falling below 2%.

The report highlighted that after banks intensively cut long-term deposit rates, the phenomenon of term deposit rates inverting has become the norm. For example, following Ping An Bank’s “Ping An Cun” three-year fixed deposit rate dropping to 1.65%, it is now lower than the two-year rate of 1.70% for amounts starting at 10,000 yuan. Jiangxi Jiangzhou Rural Commercial Bank adjusted its deposit base rates on April 9th, resulting in term deposit rates of 1.5% for one year, 1.48% for three years, and 1.47% for five years.

Other banks have also seen cases where the five-year term deposit rates are lower than one-year term deposit rates. After multiple rounds of cuts, the current one-year deposit rate at China Merchants Bank is 1.6%, while the five-year deposit rate is only 1.55%.

Furthermore, privately-owned banks and village banks in China that have historically higher deposit rates are now actively abandoning the “high-interest deposit attraction” strategy. For instance, prior to April 1st, Xingning Pearl River Village Bank’s two, three, and five-year fixed deposit rates were 2.10%, 2.75%, and 3.25% respectively. In light of recent adjustments, these rates have now dropped to 1.50%, 1.60%, and 1.55%, even lower than those of state-owned large banks. Zhongbang Bank also announced that the rates for three and five-year large deposits have been adjusted to 2.4% and 2.5% respectively, a decrease of 20 and 40 basis points.

The reason behind the widespread reduction in bank interest rates is generally attributed to the need to lower the cost on the liability side, according to industry insiders.

The latest data from the China Banking and Insurance Regulatory Commission showed that by the end of the fourth quarter of 2024, the net interest margin of commercial banks was 1.52%, at a historical low. Among the more than 20 listed banks in China that have disclosed their financial reports, the average net interest margin in 2024 was 1.65%, a drop of 19 basis points from 2023.

Guangfa Securities’ chief banking analyst Ni Jun believes that in the short term, unexpected tariff policies have impacted the economic fundamentals. It is expected that the central bank may cut reserve requirements and interest rates, but attention should still be paid to the accumulation of financial risks during the rapid decline of long-term interest rates.

Liu Rong, Chief Financial Officer of Construction Bank, predicts that there will be some downward pressure on the net interest margin in the banking industry in 2025, but the extent of the decline is expected to be smaller than last year.

In response to this, a netizen “H○” commented, “The longer the deposit term, the higher the deposit rate, and the more interest the bank has to pay, which has a greater impact on the bank’s profit. Now, the reduction of long-term deposit rates is aimed at reducing costs and increasing profits.”

However, some netizens believe that with the current sluggish Chinese economy and people’s reluctance to spend due to the economic downturn, even if banks lower interest rates, people will not withdraw money for consumption.

Netizen “Jun Hun” stated, “In my opinion, no matter how much they lower interest rates or reserve requirements, it is essential to look at the essence through phenomena and focus on the concerns and worries of the middle-aged and elderly public who like to save money, such as pensions, medical care, and children’s education. Without effective solutions in place, they will not easily spend their hard-earned savings unless their concerns about eldercare, security, and effective protection are fully addressed.”

Netizen “Rise” also added, “The more rates are lowered, the more people save and the less they consume. Everyone knows that now even the last lifeline of foreign trade has collapsed, not to mention the real estate and stock markets. If foreign trade is not resolved, ordinary people will have to consider their situation in three months.”