Cover Story: China’s Deposit Repricing Tests Banks and Savers as Trillions Come Due

By Fan Qianchan, Wang Liwei and Ding Feng

For many Chinese savers, the era of easy, high-interest deposits is ending.

One social media user recently said a family member had bought a five-year certificate of deposit in 2021 at an interest rate of 5.3% — a level the user said now seems almost unimaginable. Renewing that deposit today, it’s hard to get even 2%.

That contrast captures a broader shift under way in China’s financial system. After years of rapid inflows into high-interest time deposits, banks have been cutting rates sharply. In this context, a massive wave of household savings is maturing this year, prompting many households to reconsider where to park their money.

At a Jan. 15 press briefing, Zou Lan, a deputy governor of the People’s Bank of China, said a large volume of long-term deposits — including three-year and five-year products — are maturing and being repriced this year.

While official figures are unavailable, market estimates based on listed banks’ disclosures put the total volume of time deposits maturing this year with original terms longer than one year broadly between 30 trillion yuan ($4.3 trillion) and more than 70 trillion yuan.

The repricing event matters well beyond household balance sheets. The reset itself could reshape banks’ funding costs, while any reallocation would determine how much fresh liquidity finds its way into wealth management products, insurance and capital markets.

From deposit boom to rate cliff

China’s surge in household deposits took shape after 2020, as precautionary saving intensified amid pandemic uncertainty and volatile capital markets. Banks absorbed large volumes of medium- and long-term time deposits, many carrying interest rates above 3%, while certificates of deposit offered returns of 4% to 5%.

That window has closed. Deposit rates have been cut repeatedly in recent years, while quotas for long-term deposits have tightened and some products have been withdrawn altogether. Even where such products remain available, term structures have at times inverted, with five-year deposits offering lower interest rates than three-year ones.

The shift is unfolding as a large volume of long-term deposits comes due. Estimates by China International Capital Corp. Ltd. (CICC) show that about 61% of household long-term time deposits maturing this year are concentrated in the first quarter.

For banks, a rollover offers relief on funding costs. By late October, average rates on newly issued three-year and five-year time deposits had fallen to around 1.7% and 1.5%, respectively — nearly half the levels seen in 2022 and 2023, according to CICC. Rolling over maturing three-year and five-year time deposits at current rates in early 2026 will lower interest costs by roughly 150 basis points, the investment bank estimated.

However, lower rates run the risk that some households will seek higher returns elsewhere.

Will money really leave banks?

Analysts caution against assuming there will be an exodus of household savings from the banking system.

Households are still repairing their balance sheets, and risk appetite remains constrained, said Yunqiao Li, a senior analyst on the financial institutions team at Fitch (China) Bohua Credit Ratings Ltd. A large-scale shift into more volatile assets remains unlikely.

Even so, the sheer scale of deposits maturing this year means the potential impact cannot be dismissed. Wang Jian, chief banking analyst at Guosen Securities Co. Ltd., said that even if only a small portion of the funds were reallocated, the absolute amount would still be significant.

The effect is likely to vary by institution. Huatai Securities Co. Ltd. researchers estimate that the “Big Six” state-owned banks hold the largest share of time deposits with maturities longer than one year that are coming due in 2026, while regional lenders often benefit from more localized and stable customer bases.

An employee at a rural commercial bank in East China said most of their clients are older local residents with limited appetite for diversified asset allocation, making deposits relatively sticky.

By contrast, banks with younger, more urban customer profiles may be under greater pressure to retain deposits, industry insiders said.

Wealth management steps in

Among alternatives to time deposits, bank wealth management products (WMPs) have emerged as one of the most widely accepted options. A survey of 88 bank wealth managers by Sinolink Securities Co. Ltd. found that clients with maturing deposits show the strongest preference for bank WMPs, followed by holding cash, insurance products, bond funds and equity funds.

Banks have already been positioning WMPs to absorb maturing time deposits. An investment manager at a bank wealth management subsidiary told Caixin that beyond fee cuts, yield remains the core attraction. “The challenge is to keep risk low and performance stable while pushing returns as high as possible,” the manager said.

Outstanding bank WMPs reached a record 33.3 trillion yuan by the end of last year, up 11% from a year earlier, according to a report by China Wealth (Asset) Management Registry and Custody Co. Ltd., a state-owned industry registry. The report showed that the average WMP yield stood at 1.98% last year.

Wen Bin, chief economist at China Minsheng Banking Corp. Ltd., said that cash management WMPs offer an average yield of 1.4%, while fixed-income products can reach about 2.2%, both higher than the 1.25% interest rate on three-year time deposits at major state-owned banks.

Insurance sales heat up

As deposit rates hover around 1%, savings-type insurance products — often marketed with a “guaranteed rate of 1.75% plus dividends” — have drawn growing attention from households seeking higher returns without taking on significant risk.

Banks have stepped up insurance distribution, attracted by higher fee income. Following regulatory reforms in 2023 that lowered costs in the bancassurance channel — insurance sold through banks — some large insurers have expanded their presence in bank branches, industry insiders said. Analysts at Sinolink Securities estimated that bancassurance could attract about 1.1 trillion yuan in new funds this year, as maturing deposits are reallocated.

Insiders cautioned, however, that many buyers tend to compare insurance returns directly with deposit rates, overlooking upfront costs such as risk premiums, commissions and policy fees.

A marketing executive at a listed insurer said that for savings insurance products, the break-even period — the time it takes for a policy’s cash value to exceed total premiums paid — typically ranges from six to eight years. Products promoted during peak sales campaigns may shorten that period to three to five years, he told Caixin. Policyholders generally have limited liquidity before a policy breaks even.

Limited rush to risk assets

By contrast, a dramatic shift into equities appears unlikely. While some market participants have argued for a higher long-term allocation to stocks, analysts said that sustained gains would be needed to materially lift household risk tolerance.

Bond markets, meanwhile, look less compelling after years of yield compression. Gold, despite its strong run, is more often treated as a hedge within diversified portfolios.

The more probable outcome, analysts said, is a gradual rebalancing rather than a mass exodus. As large volumes of deposits are repriced at much lower rates this year, households are likely to edge cautiously toward alternatives that offer modestly higher returns without abandoning perceived safety.

Quan Yue, Wang Shiyu and Xia Yining contributed to this story.

Contact editors Lin Jinbing (jinbinglin@caixin.com) and Michael Bellart (michaelbellart@caixin.com)

caixinglobal.com is the English-language online news portal of Chinese financial and business news media group Caixin. Global Neighbours is authorized to reprint this article.

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