In April of this year, the amount of deposits held by residents in the country decreased significantly by 1.2 trillion yuan. For the Chinese people who have always preferred savings, why did deposits experience a cliff-like decline? Where did the money of the common people go?
In the past few years, due to the immense uncertainty brought about by the pandemic, many people have started precautionary savings, actively hoarding resources to cope with various future risks. In 2022, the new savings of the national residents reached a record-breaking 18 trillion yuan, an increase of 80% compared to the previous year. In the first quarter of this year, residents’ new savings continued to soar by nearly 10 trillion yuan, reaching the level of the entire year of 2019.
Just as everyone was diligently saving for the future and deposit amounts were steadily increasing, there was a sudden change in the situation. The household deposits in April decreased significantly by 1.2 trillion yuan. So, why did the common people’s deposits suddenly experience a significant decline?
The significant decrease in deposits in April can be attributed to seasonal factors. From the perspective of banks, the first quarter is an important assessment point, and banks need to strive to attract deposits to achieve a good start. After completing the deposit collection tasks for the first quarter, there is usually a large outflow of deposits in April. Looking at previous years, the amount of household deposits in April has always decreased. For example, in the past two years, the household deposits in April of 2021 and 2022 both decreased by over 700 billion yuan. Therefore, the deposit decrease in April this year is not unique to this year alone.
However, even considering the seasonal phenomenon that occurs every year, the magnitude of the decrease in new deposits in April this year (1.2 trillion yuan) far exceeds previous years (over 700 billion yuan). This indicates that besides seasonal factors, there are also deeper underlying reasons.
The significant decrease in household deposits in April, surpassing previous years, is largely due to recent reductions in deposit interest rates by banks. In order to stimulate economic growth, China has been continuously lowering the loan prime rate (LPR), narrowing the interest rate spread for banks. In order to improve profit margins and meet regulatory requirements, banks have started lowering deposit interest rates. Especially since the second quarter of this year, many small and medium-sized banks that used to offer higher interest rates have also begun to lower deposit rates, leading to a rapid overall decrease in domestic deposit interest rates. The rates for 3-year and 5-year terms have already dropped below 3%, only around 2.6%, and short-term deposit rates are almost negligible.
As bank deposit rates continue to decline, the public has to seek new investment and wealth management options, and a portion of their deposits have started flowing into bank wealth management products. Since last year, due to widespread losses in the bank wealth management market, many people have started withdrawing from it, causing the bank wealth management scale to shrink by over 2 trillion yuan. However, with the stabilization and rebound of bank wealth management returns in the first quarter of this year, and against the backdrop of declining deposit rates, some funds have begun to reenter the wealth management market. Data shows that the scale of bank wealth management products began to increase month-on-month by the end of April, ending a six-month trend of decline.