Core Viewpoint - The recent adjustment of deposit rates by major state-owned banks, which has a larger decline than the Loan Prime Rate (LPR), indicates a strategic move to alleviate internal pressures and prepare for potential economic fluctuations [1][5][10]. Summary by Sections Deposit Rate Adjustments - On May 20, 2025, major state-owned banks lowered various deposit rates, with the 1-year and 5-year fixed deposit rates reduced by 15 and 25 basis points respectively, while the LPR was only reduced by 10 basis points [2]. - The cumulative reduction in deposit rates since September 2022 has been greater than that of the LPR, with the 1-year and 5-year fixed deposit rates down by 80 and 145 basis points respectively, compared to the LPR's decline of 70 and 110 basis points [10]. Economic Context - The adjustments in deposit rates are influenced by external factors such as the easing of exchange rate constraints and progress in US-China trade negotiations, which have led to a stronger RMB [5]. - Internally, the need to balance net interest margins and the pressure on banks due to declining profitability, with the net interest margin dropping to a historical low of 1.33% in Q1 2025, has prompted these rate cuts [7]. Future Implications - The larger reduction in deposit rates compared to the LPR creates room for potential further rate cuts, which may be necessary to address economic volatility and insufficient demand, particularly in investment [10]. - The current economic environment, characterized by fluctuating tariffs and their impact on corporate investment and local finances, necessitates a proactive approach to monetary policy [10].