On July 28th, Huang Ya had a large certificate of deposit (CD) mature at the bank. The account manager called to inform her that the CD, which had an interest rate above 3% when deposited, would only have a new rate of 1.75% if she renewed it for another three years. This is not an isolated case. On July 25th, major Chinese banks including Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, China Construction Bank, Postal Savings Bank of China, and Bank of Communications announced a cut in the RMB deposit挂牌 rates. The rates for three-month, six-month, and one-year fixed deposits were all reduced by 10 basis points to 1.05%, 1.25%, and 1.35%, respectively; the rates for two-year, three-year, and five-year fixed deposits were all reduced by 20 basis points to 1.45%, 1.75%, and 1.80%. On July 29th, Xingye Bank, Everbright Bank, and ten other joint-stock banks followed suit, with deposit挂牌 rates mostly adjusted to below 2%. Thus, the挂牌 deposit rates of state-owned major banks and most joint-stock banks have essentially entered the "1 era."
For Huang Ya, the current interest rates in the "1s" are just a fraction of what she deposited 30 years ago. She still vividly remembers that in 1993, the interest rate on her bank's fixed deposit was over 11%. At that time, she saved 1,000 yuan after working for a year, and almost all of it went into her bank passbook.
Over the past 30 years, China's banking system has undergone earth-shaking changes, and the individual's deposit receipts have become a microcosm of the economic transformation. What changes have occurred in the deposit interest rates over the past 30 years? What are the characteristics of the times in the financial management methods of residents? The First Financial Daily interviewed three "financial managers" from different generations.
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30 years, from 10.98% to 1.35%
Everyone's memory of deposits seems to bear a special mark of the times.
For Huang Ya, who is 54 years old this year, deposits used to be the source of her sense of security and confidence. She still clearly remembers that not long after she started working, her family early on taught her the magic of savings. By depositing 100 yuan, the principal and interest would become 110 yuan the next year, and 122 yuan the year after.
Between 1992 and 2000, the first thing Huang Ya did after receiving her salary each month was to deposit 100 yuan into the bank. The compound interest of 100 yuan became her exclusive "digital game." With the accumulation of "countless" 100 yuan, by 2000, her principal and interest had approached 20,000 yuan, which just became the down payment for her small family's first home. Living in a third-tier city, she bought a 70-square-meter commercial residential property to settle down.
Although after 2000, deposit interest rates began to fluctuate and decline, Huang Ya's reliance on deposits continued, becoming a habit for her for more than 20 years thereafter. Her deposit terms also began to get longer and longer, from one year, two years to five years.
Unlike Huang Ya, Xu Lin, who was born in the late 1980s, has a more complex feeling about deposits. As far back as he can remember, the happiest thing as a child was to go to the bank with his parents to deposit his New Year's money after receiving it. The bank passbook was kept by his parents, and the annual interest became his pocket money.Soon after, although the New Year's money saved increased over time, this pocket money became increasingly "tight." In Xu Lin's memory, when he was 8 years old, his pocket money reached a peak of 30 yuan, but at the age of 9, it suddenly "dropped" to 28 yuan. In the following years, his pocket money once fell into the single digits.
Perhaps due to the "painful" memory of being hurt by savings in his childhood, Xu Lin said goodbye to savings after starting work and began to believe in active investment. With a keen "sense of smell" for the stock market, he has reaped a lot in the rising market. At the age of thirty, he still has 30% of his funds allocated to high-risk investments such as stocks and funds, with the rest being financial management, insurance, and savings, which still account for a low proportion.
Compared with them, Ding Shan, born in 1996, went from despising savings to finding them "really fragrant." As far as she can remember, in the fragments of others, Ding Shan's impression of savings has always been negative tags such as "can't keep up with inflation" and "depreciation." In her early cognition, the most powerful investment was real estate in big cities, and the most common thing around her was the case of "getting rich overnight" after buying a house in a big city. The most failed investment was to "idle" put the money in the bank to "eat interest."
But after entering the job, Ding Shan's impression of savings slowly changed, from "really local" to "really fragrant."
The first time she realized that savings were "really fragrant" was in 2022. At that time, after working for many years, most of her funds were placed in financial management and funds. Under the sudden market fluctuations, the financial management returns were significantly retracted. "After repeated research on financial products, I have been tossing for a year, and the return rate is less than 2%, which is not as good as a large deposit certificate." Ding Shan said.
Since then, she has started to make a strict savings plan for herself, hoping to save while the interest rate is relatively high, and lock in long-term returns.
Their experiences are a microcosm of the changes in China's deposit interest rates.
According to data from the People's Bank of China, from 1990 to 1996, the benchmark interest rate for three-year RMB deposits was mostly above 7%, reaching a peak of 12.24% in July 1993. Starting in 2000, the benchmark interest rate for three-year RMB deposits has basically dropped below 5%. In October 2015, the benchmark interest rate for three-year RMB deposits was reduced to 2.75%.
In addition, according to Choice data citing data from the World Bank, from 1993 to 1995, China's one-year deposit interest rate was about 10.98%. By 1998, this data indicator was reduced to 3.78%, and it has been below 3% for many years. In the past five years, this deposit interest rate indicator has been stable at 1.5%.
It is worth noting that after the latest round of deposit interest rate cuts, the one-year fixed deposit interest rate of state-owned large banks has once again decreased by 10 basis points to 1.35%. With this rough calculation, over 30 years, the one-year deposit interest rate has dropped from 10.98% in 1994 to 1.35% in 2024, "shrinking" by more than 963 basis points.The Evolution of Financial Management Methods
For a long time, savings have served as a stable "anchor" in the wealth of Chinese families, acting as the foundational pillar in asset allocation. However, across different eras, beyond the risk-free returns of deposits, residents have also sought higher investment and financial returns.
Huang Ya recalls that in her youth, aside from savings, the most popular method was stock trading. After the year 2000, Huang Ya and her husband began to entrust a small portion of their funds to others for investment in the stock market. "But because we didn't understand the basic knowledge and were afraid of losing money, we didn't invest much," said Huang Ya.
For Huang Ya at that time, a more down-to-earth investment method was the folk "biao hui," which was quite popular in the Fujian area. However, this method, similar to private lending, could not guarantee compliance and safety.
After starting work, Xu Lin, a post-80s generation, discovered a broader financial market with a continuous emergence of new products. He kept switching between various financial battlefields such as the stock market, funds, and wealth management. "No matter what the product is, the highest return phase is often the 'less-traveled' early stage," he told the reporter, adding that actively understanding new investment methods in the market, assessing risks, and entering at the right time is his "path to wealth."
For Ding Shan, in the two or three years after her graduation, the tracks that Xu Lin had heavily invested in seemed to have lost their appeal. She listed them one by one for the reporter: increased fluctuations in fund returns, a downward stock market, continuous trust explosions, and even low-risk financial management carries the risk of net value retraction.
After "quitting her job" this year, Ding Shan once opened an account on a social platform to record her monthly savings interest and investment returns, to test whether she could "lie flat" from then on. "The conclusion is far from enough; even renting and living in cheaper places like the seaside in Huizhou, I still have to subsidize," Ding Shan calculated that with more than 300,000 yuan in financial management, savings, and funds, she only had less than 1,000 yuan in returns each month. In one month, her stocks continued to fall, and a loss of nearly 1,000 yuan on a principal of 10,000 yuan directly devoured the accumulated returns of the month's financial management. Now, she has also become a "savings special forces soldier," looking for banks with relatively higher interest rates across the country to deposit her money.
Will savings interest rates continue to fall?
"At present, the deposit interest rate is significantly lower than the level of the last century, which is related to the changes in the domestic economic and financial environment, and at the same time, it also shows a long-term trend of interest rates moving downward," said Zhou Maohua, a researcher at the Macro Market Department of China Everbright Bank, to the First Financial reporter. High deposit interest rates in the last century were matched with the relative levels of loan interest rates and the overall investment returns of society, whereas currently, market economic development, changes in supply and demand relationships, a decrease in the overall investment return rate of society, and the rapid development of the financial market have all driven the downward trend of deposit interest rates.
"Especially in recent years, with macroeconomic fluctuations, banks are in a complex operating environment, with net interest margins narrowing rapidly. Banks actively optimize their liability structure and reasonably price deposits," Zhou Maohua believes that the rational reduction of deposit interest rates by banks is beneficial for reducing the financing costs for residents and businesses, promoting investment and consumption. At the same time, the downward trend of deposit interest rates, economic recovery, and the warming of financial market sentiment will further reduce the savings tendency of businesses and residents, promote the optimization of asset allocation by market entities, enhance the momentum of capital flowing to the capital market, help stabilize and rise in the stock market, and increase the vitality of the financial market.From a longer-term perspective, the 30-year evolution of deposit interest rates also reflects the gradual progress of interest rate marketization reform.
Xiao Yu, Chief Fixed Income Analyst at Zhongtai Securities, analyzed several important stages of the deposit interest rate marketization process in China in a research report. The first stage was the benchmark interest rate era (the 1990s), where deposit interest rates were determined by the benchmark rates published by the central bank, with neither upward nor downward adjustments; the second stage was capping the upper limit and allowing downward floating (2004-2015), which synchronized the management of the deposit interest rate upper limit with the loan interest rate lower limit management; the third stage was lifting the upper limit (2015-2019), in October 2015, the central bank announced that it would no longer set an upper limit on deposit interest rate fluctuations for commercial banks and rural cooperative financial institutions; the fourth stage is self-regulation management plus market-driven advancement (from 2019 to the present). In April 2022, the central bank guided the interest rate self-regulation mechanism to establish a market-oriented adjustment mechanism for deposit interest rates, with member banks of the interest rate self-regulation mechanism reasonably adjusting the level of deposit interest rates by referring to bond market interest rates represented by the 10-year government bond yield and loan market interest rates represented by the 1-year LPR (Loan Prime Rate).
In recent years, the downward trend of deposit interest rates has been largely based on the market interest rate pricing mechanism. For example, from May to August 2022, the 1-year and 5-year-plus LPRs were cumulatively reduced by 5BP and 30BP, respectively. With the reduction of LPR, in mid-September 2022, some state-owned banks and joint-stock commercial banks reduced the interest rate on demand deposits by 5BP, the interest rate on 3-year fixed deposits by 15BP, and the interest rate on fixed deposits of more than 3 years by 10BP.
Dong Ximiao, Chief Researcher at China United Network Communications, told First Financial Daily that this year, the two reductions in LPR, as well as the commercial banks' increased efforts to reduce fees and make profits for the real economy, have inevitably put pressure on bank profits and net interest margins. By the end of the first quarter, the net interest margin of China's commercial banks had already dropped to a historical low of 1.54%. Although the financial regulatory authorities had previously rectified illegal manual interest supplements and some policy interest rates had been reduced, if profits and interest margins continue to decline, the pressure on banks to continue reducing fees and making profits, and to develop steadily, is relatively large. Under these circumstances, reducing deposit interest rates and compressing liability costs have become a reluctant but realistic choice for commercial banks.
At present, most industry insiders believe that there is still room for banks to lower deposit interest rates in the future.
Dong Ximiao told First Financial Daily that next, banks may also take more measures, including reducing deposit interest rates and optimizing deposit structures, to continue to reduce the cost of funds, strive to maintain a basically stable interest margin, continue to maintain a steady development trend, and maintain the strength of serving the real economy.
Zhang Xu, Chief Fixed Income Analyst at Everbright Securities, judged in a research report that within 2024, deposit interest rates are more likely to experience multiple rounds of decreases, and will adopt the model of "large banks taking the lead, joint-stock banks quickly following, and other banks orderly following." He expects that the next stage will also see the establishment and improvement of self-regulation talks and reporting mechanisms to better maintain the order of competition in the deposit market.
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