Posted BY: | NwoReport
With China’s post-covid recovery stalling and the economy stagnating, many said it was only a matter of time before China engages in fresh easing – especially when it comes to propping up its all important property market – on Tuesday, Chinese authorities asked the nation’s biggest banks to lower their deposit rates for at least the second time in less than a year, Bloomberg reported citing sources familiar, marking an escalated effort to boost the world’s second-largest economy.
State-owned bank giants such as Bank of China Ltd., Industrial & Commercial Bank of China Ltd. and Bank of Communications Co. were told last week to cut rates on a range of products, including on demand deposits by 5 basis points and three-year and five-year time deposits by at least 10 basis points, a request which was communicated through the central bank’s interest rate self-disciplinary mechanism.
As Bloomberg notes, banks are assessing the request and may adjust rates as early as this week, adding that the move isn’t mandatory although in China if a state-owned bank doesn’t follow the state’s guidance, it is usually not a great look. Big lenders currently offer an annualized rate of 0.25% demand deposits, and 2.6% and 2.65%, respectively, on three-year, five-year time deposits.
The guidance, which follows similar rate reductions in September last year, will help alleviate pressure on lenders as they strive to balance shrinking margins and government directives to beef up lending support to the economy.
Once the deposit rates cut takes effect, it would lower the costs of banks, enabling them to reduce lending rates over time. That, in turn, would make it more attractive for consumers and businesses to borrow. Lower deposit rates would also make it less attractive for consumers to park their cash at banks.