China's deposit interest rate adjustment and impact
Introduction
The financial sector has been the subject of much attention, especially in relation to interest rate-related policy changes. In this article, we will delve into China's recent deposit rate adjustments, an event that has important implications for banks and investors. We will first introduce the specific policy background, and then discuss the response strategies of various types of banks and the potential impact of this adjustment on the real economy.
Background to policy adjustments
On June 21, 2023, the adjustment of deposit interest rates for many banks in China officially came into effect. The most striking feature of this adjustment is that the original calculation method of "benchmark interest rate × multiple" has been revised to "benchmark interest rate + basis points". The deposit interest rates of the four major state-owned banks, especially those with a maturity of more than one year, have generally been lowered; Short-term deposit rates have risen slightly. In addition, the interest rate on large certificates of deposit was cut even more significantly, by more than 60 basis points to 3.35%.
Uncertainty in self-regulatory mechanisms
Similar to the reform of the Loan Prime Rate (LPR), this self-regulatory mechanism for deposit rates does not specify the upper limit of deposit interest rates for various types of banks. It is expected that the self-discipline mechanism may provide a "window guide price", and major commercial banks will adjust it according to their own conditions. This policy not only helps to promote competition, but also better reflects market demand.
However, it is worth noting that the basis point caps of the big state-owned banks are generally low, which has led to a relatively large reduction in their deposit rates. Interest rate differentials between different deposit products are also widening, with large state-owned banks generally having lower basis point caps than other banks, with a difference of more than 10 basis points.
Reduction of interest rates on large certificates of deposit
The most obvious impact is on the interest rate on large certificates of deposit, especially for products with longer maturities. This policy change is undoubtedly a blow to investors who want to obtain higher returns through large certificates of deposit. However, it also means that banks will have more incentive to raise their own balance sheet costs to better support the real economy.
Existing deposit products will not be affected
To be clear, this adjustment of the deposit interest rate will not affect the interest rate of the previously purchased stock deposit products. As a result, investors who have already purchased deposit products with higher interest rates can maintain their level of earnings. This policy protects the rights and interests of depositors from losses due to policy changes.
Recommendations and implications
It is crucial for investors to adapt to lower deposit rates. This means diversifying your assets in order to achieve higher returns. In addition, other investment channels, such as stocks, bonds, etc., can also be considered to avoid the risks caused by the decline in deposit rates.
From the bank's point of view, this adjustment will help reduce the cost of liabilities for medium- and long-term deposit products, thereby reducing the financing cost of the real economy. This will help support the development of the real economy and promote economic growth.
conclusion
The adjustment of China's deposit interest rate is part of the financial policy aimed at promoting the reform and development of the financial market. The impact of this policy is not limited to banks and investors, but also affects the economic situation of the country as a whole. Against this backdrop, both banks and investors need to respond to policy changes to better protect their interests and achieve economic growth.