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Emma Ma

Prompted by lower interest rates on long-term bank deposits, Gong Jie, who works for an export firm in Shanghai, recently decided to invest half her savings in technology-focused mutual funds.
“A three-year deposit of mine at Industrial and Commercial Bank of China (ICBC) matured a month ago, but the current rates have almost halved from three years ago,” she said. “Normally, I would not put this capital into wealth management products due to risk concerns. Life insurance products used to be my secondary option. But inspired by the rally in AI-related stocks, I now want to give equity investment a try.”
Three-year time deposits at ICBC, China’s largest lender, now pay 1.55 per cent interest a year in Shanghai, down from nearly 3 per cent in 2023.
Gong said she withdrew the money from her ICBC deposit account and put it into two mutual funds focused on chips and co-packaged optics (CPOs), two of the A-share market’s hottest sectors.
CPO technology places optical devices inside the same chip package as semiconductors – creating what are known as application-specific integrated circuits. Putting the devices closer together slashes power consumption, increases bandwidth density and reduces latency.
Account managers at several state-owned banks in Shanghai said money from deposit accounts mainly flowed into life insurance products last year, with some going into gold-related financial products. But, since the beginning of this year, middle-income depositors had developed an appetite for tech-focused mutual funds, mainly driven by interest in companies listed on the ChiNext market.
The index tracking Shenzhen’s tech-heavy ChiNext market surged 49.6 per cent last year and, as of Friday, was up 23.6 per cent in 2026, spurred by Beijing’s efforts to encourage innovation in key technologies like semiconductors and artificial intelligence (AI).
“I think leading Chinese firms with core technologies will continue to flourish and attract investment,” said Dong Yijun, a Shanghai-based retail stock investor. “I feel it is safe to chase the rally for now, since they are supported by the government.”
Data from the People’s Bank of China showed that 7.68 trillion yuan (US$1.13 trillion) was added to household deposits at mainland banks in the first quarter of this year, down 16.7 per cent from the 9.22 trillion yuan recorded in the same three months last year. Meanwhile, the total net asset value of mutual funds on the mainland topped 39 trillion yuan for the first time this April, up 1.65 trillion yuan from the end of last year.
Households are deleveraging, while borrowing demand from local governments and businesses is subdued
Dong Ximiao, Shanghai Institution for Finance and Development
The trend appears poised to continue, as falling demand for banking loans has led some Chinese commercial lenders to stop offering long-term deposit products with higher interest rates.
Beijing Zhongguancun Bank became the latest to do so at the end of last month, when it announced it would no longer offer three-year deposits. Earlier, Bank of Sanxiang in central China’s Hunan province stopped offering five-year deposits, as did Shanghai-headquartered Huarui Bank, which was once renowned for its high deposit yields. Anhui’s Xinan Bank was another that took similar action.
“In the future, small mainland banks will continue to reduce their deposit rates or withdraw long-term deposit products in order to keep net interest margins (NIMs) in positive territory”, said Dong Ximiao, deputy head of the Shanghai Institution for Finance and Development think tank.
The NIM is the difference between lending and deposit rates. According to official data, the interest margin for China’s banking industry has dropped to 1.4 per cent, well below the 1.8 per cent level widely recognised as a warning line for banking profitability.
Weaker borrowing demand, which has made it hard for banks to raise interest rates on loans, was the main reason behind their decisions to stop offering long-term deposits. A chief economist at a domestic securities brokerage, who asked not to be identified, said that a fall in fresh yuan-denominated loans across the mainland in April had far exceeded market expectations.
“Households are deleveraging, while borrowing demand from local governments and businesses is subdued,” he said, adding that a recovery in demand would not take place any time soon amid a continuing property slump.
At the same time, small banks’ bad debts are growing. Figures from the National Administration of Financial Regulation showed that by the end of March, the average non-performing loan (NPL) ratio at commercial banks had reached 1.51 per cent, up 2 basis points from the end of last year. NPL ratios at some privately owned lenders were as high as 1.89 per cent.
“For rural commercial banks and privately-owned lenders, their core client bases are small enterprises and agriculture-related entities with lower risk-management capability,” Dong Ximiao said. “They also face stiff competition as large state-owned banks expand their businesses aggressively. That’s why their NPL ratio climbed fast.”
Competition, already cutthroat, is set to become even more intense, with mainland media reporting that financial regulators had instructed commercial banks to ramp up loans. Two industry sources confirmed that, saying they were now focusing on short-term business loans.


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Some commercial lenders have stopped offering long-term deposit products with higher interest rates


Some commercial lenders have stopped offering long-term deposit products with higher interest rates.


Why are Chinese savers moving money out of banks and into tech stocks?

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Some commercial lenders have stopped offering long-term deposit products with higher interest rates

Some commercial lenders have stopped offering long-term deposit products with higher interest rates