Chinese Banks Raise Deposit Rates Amid Peak Season

Banks in China have been increasing their deposit rates to attract customers, particularly during the Chinese New Year season. According to reports, some small and medium-sized banks have raised their deposit rates by as much as 1.7% to 2.15% for certain terms.

For instance, the Luoyang Rural Commercial Bank in Shanxi Province announced that it would increase its one-year, two-year, and three-year deposit rates to 1.70%, 1.90%, and 2.15%, respectively, starting from February 12th. Similarly, the Peach Blossom Rural Commercial Bank in Hunan Province raised its one-year and two-year deposit rates to 1.6% and 1.7%, respectively, with a minimum deposit requirement of 50,000 yuan.

Another example is the Lingshan County Rural Credit Union in Shanxi Province, which increased its deposit rates for terms ranging from three months to five years. The rates vary depending on the amount deposited, with deposits below 20,000 yuan eligible for higher interest rates.

The move by these banks to raise their deposit rates is seen as a way to attract customers during the peak season for deposits. According to industry insiders, this trend is likely to continue in the coming months, driven by the ongoing narrowing of the yield curve and the need for banks to maintain their liquidity.

However, some experts have cautioned that this trend may not be sustainable in the long term. 'The deposit rate increase is a short-term measure to attract customers during the peak season,' said Lou Feipeng, a researcher at China Post Savings Bank. 'In the long run, banks need to focus on providing differentiated services and managing their asset-liability ratios effectively.'

Another expert, Dong Ximiao, chief researcher at Zhonglian Research Institute, emphasized the importance of banks adopting a more nuanced approach to deposit rate management. 'Banks should abandon their obsession with scale and speed, and instead focus on maintaining stable growth in deposit business while controlling debt costs effectively,' he said.

The trend towards higher deposit rates is likely to continue, driven by the ongoing narrowing of the yield curve and the need for banks to maintain their liquidity. As such, it remains to be seen whether these rate hikes will have a lasting impact on the banking industry in China.