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Data from the central bank showed that RMB deposits increased by 10.66 trillion yuan in the first seven months. Calculating the difference with the semi-annual data, RMB deposits decreased by 800 billion yuan in July, with deposits of residents and enterprises all shrinking to varying degrees.

Market analysts believe that July is a short month, and the changes in data are due to both seasonal factors and the ban on "manual interest payments" and the shift of corporate and household deposits to financial management after the deposit rate cut.

Deposits decreased by 800 billion in July

Data showed that RMB deposits increased by 10.66 trillion yuan in the first seven months, of which household deposits increased by 8.94 trillion yuan, non-financial enterprise deposits decreased by 3.23 trillion yuan, fiscal deposits increased by 401.9 billion yuan, and non-banking financial institutions deposits increased by 2.96 trillion yuan.

The previous statistics for the first half of the year showed that RMB deposits increased by 11.46 trillion yuan in the first half of the year, of which household deposits increased by 9.27 trillion yuan, non-financial enterprise deposits decreased by 1.45 trillion yuan, fiscal deposits decreased by 243.4 billion yuan, and deposits of non-banking financial institutions increased by 2.21 trillion yuan.

In contrast, in July alone, RMB deposits decreased by 800 billion yuan, of which residents' deposits decreased by 330 billion yuan, corporate deposits decreased by 1.78 trillion yuan, fiscal deposits increased by 645.3 billion yuan, and deposits of non-bank financial institutions increased by 750 billion yuan.

Industry experts believe that, looking at the sub-items, the household and corporate deposits declined significantly in July. After rebounding in June, the rebound of corporate deposits towards financial management intensified after the ban on "manual interest supplementation", and the household side also turned to financial management due to the interest rate cut. The small increase in fiscal deposits in the month should be affected by the slowdown in government bond issuance and the slow fiscal spending at the beginning of the quarter.

China Everbright BankZhou Maohua, a macro-researcher at the Financial Markets Department, believes that the decline in deposit interest rates has pushed some deposit funds to flow into financial assets such as wealth management, savings bonds, etc.; the cautious loan financing of residents and enterprises has affected deposit creation.

Where did the reduced deposits go?

The reduction in household and corporate deposits contrasts with the expansion of wealth management scale.

Many analyses point out that with the recovery of the wealth management market and the reduction in deposit interest rates, many individuals and companies have shifted funds from deposits to wealth management products.

according toCITIC SecuritiesThe research team estimates that the scale of wealth management will decrease by 1.12 trillion yuan month-on-month to 28.59 trillion yuan in June 2024, of which cash wealth management will decrease by 860 billion yuan month-on-month.，It is lower than the historical average of 1.27 trillion yuan from 2018 to June 2023. The reason is that the four major banks, which are most affected by the ban on manual interest payments, have only slightly more than 400 billion yuan in balance sheet, and the lack of liabilities of the big banks may be alleviated. In July, the scale of bank wealth management increased by about 1.78 trillion yuan month-on-month to 30.30 trillion yuan.,It exceeds the average of 1.69 trillion yuan from 2018 to 2023, of which the scale of cash wealth management only increased by 340 billion yuan, with extremely high growth quality.

In fact, the central bank pointed out in the "First Quarter Monetary Policy Implementation Report" that the rates of return between various types of assets such as on-balance sheet deposits and off-balance sheet asset management products will change, affecting residents' risk preferences and investment behavior. Residents will adjust their asset allocation accordingly, which is an important factor affecting the proportion of residents' deposits.

Luo Zhiheng, chief economist of Guangdong Securities, believes that after the central bank standardizes manual interest subsidies, some arbitrage deposits will flow out of the banking system, and either be invested in entities or diverted to wealth management products.

This can be confirmed by the changes in corporate deposits and non-bank deposits. In July, corporate deposits increased by 250 billion yuan year-on-year, while non-bank deposits increased by 337 billion yuan year-on-year.

Analysts pointed out to reporters that in the previous period, some of the corporate demand deposits obtained relatively high returns through "manual interest supplement". After the "manual interest supplement" behavior was regulated, corporate demand deposits declined, and some gradually turned to financial management. The relevant impact continued to appear, resulting in a continuous decline in M1 in recent months. Data shows that the fundraising of asset management products has grown rapidly, with a year-on-year increase of 10.3% at the end of July, diverting bank on-balance sheet deposits.

In addition, many industry experts also mentioned that in the context of declining deposit interest rates and increasing fluctuations in the net value of the wealth management market, some investors choose to use the funds to repay loans in advance.

Will there be a large-scale “deposit migration”?

A new round of deposit "interest rate cuts" was implemented on July 25, with the six state-owned banks collectively announcing a reduction in deposit interest rates. The adjustment covers all deposit types, including current, time deposits, agreement deposits, and notice deposits, with a reduction ranging from 5 to 20 basis points.

In recent years, affected by the special macroeconomic situation and policies, market interest rates, including deposit market interest rates, have fallen rapidly and by a large margin, which has also had a certain negative impact on residents' willingness to save.

The central bank's "2024 Second Quarter Urban Depositor Questionnaire Survey Report" shows that 61.5% of residents prefer "more savings", a decrease of 0.2 percentage points from the previous quarter; 13.3% of residents prefer "more investment", a decrease of 1.5 percentage points from the previous quarter. The top three investment methods preferred by residents are::"Bank, securities, and insurance company financial products", "Fund trust products" and "Stocks", the proportion of residents who chose these three investment methods were 42.2%, 18.2% and 13.5% respectively.

Zhou Maohua believes that due to the decline in deposit returns and the rebound in expected returns on wealth management products, it is not ruled out that some deposit funds will flow to financial assets such as wealth management products in the future. However, it is not expected that there will be a large-scale "deposit migration". On the one hand, the reduction in deposit interest rates will have little impact on the overall returns of depositors; on the other hand, the overall gap between the 3-year and 5-year deposit rates of small and medium-sized banks and the expected returns of wealth management products, government bonds and other asset returns is not large, and residents need to consider risk factors when choosing assets.

He gave an example, saying that if a depositor has 50,000 yuan in deposits, the one-year time deposit rate is reduced by 10 basis points, and the annual interest income is reduced by 50 yuan. Taking into account the residents' participation in other over-the-counter bonds, wealth management products, funds and other ways to diversify asset allocation, the comprehensive income of assets will not be greatly affected.

Compared with the same period last year, corporate deposits decreased by 1.78 trillion yuan in July, a decrease of 250 billion yuan more than the same period last year. On the resident side, resident deposits decreased by 330 billion yuan in July, but decreased by 479.3 billion yuan less than the same period last year. This may also confirm that although deposit interest rates generally decreased in July, there has not yet been a large-scale transfer of resident deposits to "financial management".