Chinese banks are anticipated to reduce interest rates on approximately 300 trillion yuan worth of deposits, potentially as early as this week, according to sources familiar with the situation as reported by Bloomberg News.
Leading financial institutions, such as the Industrial & Commercial Bank of China and the China Construction Bank Corp, are expected to follow the guidance set by the People’s Bank of China’s interest rate self-disciplinary mechanism to decrease rates on several deposit products.
The expected reductions include a minimum of 20 basis points on one-year time deposits, and at least 25 basis points on longer tenures.
This move aligns with previous statements from Pan Gongsheng, the Governor of People’s Bank of China, who in September indicated plans to further reduce deposit rates by 20 to 25 basis points. Should these reductions occur, it would mark the second significant rate cut this year, following similar actions taken in July.
The strategy aims to alleviate profitability pressures facing banks in light of reduced mortgage rates and benchmark lending rates, which are part of China’s broader effort to rejuvenate its economy amid deflationary concerns.
The ongoing economic slowdown and distress within the real estate sector continue to challenge Chinese lenders, characterized by tepid loan demand and escalating bad debts.
