Core Viewpoint - The long-term large-denomination certificates of deposit (CDs), once considered a "tool for attracting deposits," are gradually disappearing from major banks in China, indicating a shift in banks' strategies to optimize their liability structures and stabilize net interest margins [1][2]. Group 1: Changes in Large-Denomination CDs - Major banks have removed 5-year large-denomination CDs from their apps, while 3-year CDs are still available but often marked as "sold out" or "in short supply" [2]. - The interest rates for 3-year large-denomination CDs are concentrated between 1.5% and 1.8%, despite the overall decline in rates [2]. - The reduction of high-cost long-term large-denomination CDs is seen as a direct method for banks to manage their liability structures and stabilize net interest margins, which remain at historical lows [2][3]. Group 2: Interest Rate Adjustments - Many local banks have also begun to adjust their deposit structures, with some, like the Mengyin Village Bank in Inner Mongolia, canceling 5-year fixed deposit products and lowering rates for other terms [3][4]. - Since the establishment of the market-oriented deposit rate adjustment mechanism in April 2022, major banks have reduced deposit rates in multiple rounds, with the latest cuts occurring in May 2023 [5]. Group 3: Shifts in Investment Preferences - As interest rates decline, depositors are encouraged to adopt rational expectations and consider diversifying their asset allocations, including investments in government bonds and low-risk financial products [5]. - A survey indicates a shift in residents' preferences, with a decrease in those favoring "more savings" and an increase in those leaning towards "more investments" [5]. - The scale of the banking wealth management market reached 32.13 trillion yuan by the end of Q3 2025, reflecting a year-on-year increase of 9.42% [5][6].

Core Viewpoint - The long-term large-denomination certificates of deposit (CDs), once considered a key tool for attracting deposits, are gradually disappearing from major banks in China, indicating a shift in banks' strategies to optimize their liability structures and stabilize net interest margins [1][2][3]. Group 1: Disappearance of Long-term CDs - Major banks, including state-owned and joint-stock banks, have removed 5-year large-denomination CDs from their apps, with some banks indicating that 3-year CDs are either sold out or in limited supply [2][3]. - The interest rates for the remaining 3-year large-denomination CDs are concentrated in the range of 1.5% to 1.8%, despite the general trend of rates being in the 1% range [2][3]. Group 2: Impact on Net Interest Margins - The reduction of high-cost long-term large-denomination CDs is a direct method for banks to optimize their liability structures and stabilize net interest margins, which are currently at historical lows [1][3]. - As of the third quarter of 2025, the net interest margin for commercial banks in China was reported at 1.42%, remaining unchanged and still low compared to historical levels [1]. Group 3: Broader Trends in Deposit Rates - Several local banks have also begun to lower their deposit rates, with some banks announcing the cancellation of 5-year fixed deposit products and reducing rates for shorter-term deposits [3][4]. - Since the establishment of the market-oriented deposit rate adjustment mechanism in April 2022, major banks have conducted multiple rounds of rate cuts, with the most recent occurring in May 2025 [5]. Group 4: Shift in Investment Preferences - As interest rates decline, there is a growing need for depositors to establish rational expectations and consider diversifying their asset allocations towards low-risk investment products such as government bonds and stable investment products [5]. - A survey indicated that 62.3% of urban depositors preferred "more savings," while 18.5% favored "more investments," reflecting a shift in investment behavior towards bank wealth management products [5]. Group 5: Future Projections for Wealth Management - A report from CITIC Securities projected that the growth of wealth management products will continue, driven by the ongoing shift of deposits towards various asset management products, with an expected growth rate of around 10% in 2026 [6][7].

Core Viewpoint - The announcement by Inner Mongolia's Tuyuqi Mengyin Village Bank to cancel its five-year fixed deposit product starting November 5, 2025, marks a significant shift in the banking industry, reflecting ongoing pressure on net interest margins and prompting other banks to adjust their deposit rates and products accordingly [1][5][12]. Summary by Category Product Adjustments - Tuyuqi Mengyin Village Bank is the first commercial bank to explicitly announce the removal of the five-year fixed deposit product, alongside lowering interest rates for other deposit terms [1][5]. - The bank has reduced the interest rates for various deposit terms: three-month from 1.15% to 1.10%, six-month from 1.35% to 1.30%, one-year from 1.50% to 1.45%, two-year from 1.60% to 1.55%, and three-year from 1.95% to 1.85% [3][6]. - Similar actions have been observed in other banks, with some private banks reporting "sold out" or removal of mid to long-term deposit products [1][7]. Market Context - The adjustments in deposit products are a response to the persistent pressure on net interest margins faced by banks, particularly smaller banks that are more sensitive to funding costs [4][8]. - The overall trend shows that many banks are actively lowering deposit rates to manage their liabilities and improve their financial stability amid a challenging interest rate environment [7][9]. Implications for the Banking Sector - The cancellation of long-term deposit products and the reduction of interest rates are seen as proactive measures by banks to optimize their balance sheets and mitigate the impact of declining asset yields [11][12]. - This shift may lead to a "deposit migration" effect, where funds move from traditional bank deposits to capital markets, potentially increasing liquidity in stocks, bonds, and funds [12][13]. - Analysts suggest that the market is witnessing a more pronounced adjustment mechanism for deposit rates, indicating a trend towards stabilizing net interest margins in the banking sector [13].

Group 1 - Several small and medium-sized banks have announced a reduction in RMB deposit rates, with cuts ranging from 10 to 20 basis points [1] - Major banks such as Industrial and Commercial Bank of China, Agricultural Bank of China, and Bank of China collectively lowered their deposit rates for the first time since 2025, marking the seventh proactive reduction since the market-oriented adjustment mechanism was established in April 2022 [1] - As of the end of the second quarter, the net interest margin for commercial banks in China was 1.42%, a decrease of 0.01 percentage points from the end of the first quarter [5] Group 2 - The chief researcher from Zhaolian suggested that small and medium-sized banks should adopt differentiated competition strategies, focusing on regional economic characteristics and the needs of small and micro enterprises [5] - With the decline in deposit rates and improving resident expectations, the attractiveness of capital and wealth management markets may further increase [5] - The researcher from Postal Savings Bank of China indicated that deposit rates still face downward pressure, urging residents to balance returns and risks based on their investment experience and risk preferences [5]

Core Viewpoint - Recent interest rate cuts on deposits have been observed among small and medium-sized banks in various regions, including Zhejiang, Guangdong, and Jilin, with reductions ranging from 5 basis points (BP) to 20 BP, particularly notable in three-year and five-year terms [1][2]. Group 1: Interest Rate Adjustments - Guangdong ChaoYang Rural Commercial Bank has adjusted its deposit rates effective August 21, with three-month, six-month, one-year, and two-year rates reduced by 10 BP to 0.7%, 0.9%, 1%, and 1.1% respectively, while three-year and five-year rates were lowered by 15 BP to 1.3% and 1.35% [1][2]. - In Jilin, several village banks, including Changchun Chaoyang and Jilin Longtan Huayi, have also lowered their deposit rates starting August 20, with the current rates for three-month, six-month, one-year, and two-year deposits set at 1.15%, 1.35%, 1.6%, and 1.65%, all down by 10 BP [2][6]. - Zhejiang Shengzhou Ruifeng Village Bank announced new rates on August 19, with three-month, six-month, one-year, two-year, three-year, and five-year rates set at 0.8%, 1.1%, 1.15%, 1.15%, 1.3%, and 1.3%, reflecting a decrease of 10 to 20 BP [6][7]. Group 2: Trends in Deposits - Jilin BaiShan HunJiang Hengtai Village Bank has reduced its deposit rates four times this year, with all term rates now below 2% after initial rates were 2%, 2.1%, 2.3%, and 2.05% for one-year, two-year, three-year, and five-year deposits respectively [3]. - Shenzhen Pingshan Zhujiang Village Bank has also joined the trend, lowering its one-year fixed deposit rate from 2% to 1.8%, a reduction of 20 BP, and its agreed deposit rate from 0.8% to 0.5%, down 30 BP [7]. - According to a report by CITIC Securities, since the establishment of the market-oriented adjustment mechanism for deposit rates in 2022, commercial banks have been reducing their funding costs, leading to a decrease in the attractiveness of deposits for savers, as evidenced by a year-on-year reduction of 780 billion yuan in household deposits in July [7].

Core Viewpoint - The People's Bank of China (PBOC) is maintaining liquidity in the banking system by conducting a medium-term lending facility (MLF) operation of 100 billion yuan and a reverse repurchase operation of 100 billion yuan, with unchanged interest rates, to ensure market liquidity remains adequate [1][2]. Group 1: MLF Operations - The PBOC's MLF operation this month is a rollover of the 100 billion yuan maturing amount, indicating a stable liquidity environment influenced by recent profit remittances and reserve requirement ratio (RRR) cuts [1]. - The MLF interest rate has remained unchanged for four consecutive months since a reduction in January, aimed at avoiding irrational depreciation expectations of the yuan amid tightening U.S. monetary policy [2]. Group 2: Economic Outlook - Short-term economic pressures persist, with the PBOC expected to maintain a flexible and moderate monetary policy to support the recovery of the real economy, focusing on structural tools to address specific weaknesses and promote domestic demand [3]. - The PBOC's recent measures, including lowering the mortgage rate for first-time homebuyers, reflect targeted adjustments in response to the real estate sector's impact on the macroeconomy [2][3]. Group 3: Interest Rate Adjustments - The LPR (Loan Prime Rate) is anticipated to have room for downward adjustment, particularly the one-year LPR, driven by lower market interest rates and regulatory efforts to guide deposit rates downwards [4]. - A reduction in the LPR typically requires two consecutive RRR cuts, with the recent cut being the first in this sequence, suggesting that further adjustments may be forthcoming [4].

Group 1 - The core viewpoint is that the downward adjustment of deposit rates in China has led to a significant increase in life insurance premium income, with life insurance premium income reaching 3.19 trillion yuan in 2024, a year-on-year growth of 15.45%, surpassing the overall industry growth rate [3][4] - The attractiveness of savings-type life insurance products has increased as the value preservation and appreciation attributes of bank deposits have weakened, making insurance products a "safe haven" for residents' savings [3][4] - The low interest rate environment presents a double-edged sword for the insurance industry, benefiting short-term sales of savings insurance but increasing the risk of interest spread losses in the long term [3][4] Group 2 - Insurance companies are changing their product strategies by increasing the supply of floating income products, with nearly 40% of life insurance being dividend and universal products in the first quarter of this year [4] - The industry is expected to shift from "savings replacement" to a focus on "risk protection + long-term financial planning," emphasizing the risk protection function of products [4] - Insurance companies are gradually transitioning to risk management services, which may become less sensitive to interest rate fluctuations [4]

Core Viewpoint - The recent adjustment of deposit rates by major banks marks the seventh round of rate cuts, significantly lowering the cost of bank liabilities and stabilizing profit margins, which is expected to enhance the banks' internal growth capabilities and maintain sound operations [4][7]. Group 1: Deposit Rate Adjustments - As of May 21, nine joint-stock banks have announced adjustments to their deposit rates, following the lead of the six major state-owned banks [5]. - The new rates include a 5 basis point reduction in demand deposit rates and a 15-25 basis point reduction in time deposit rates, with the one-year fixed deposit rate falling below 1% [3][5]. - The current demand deposit rate is now close to zero, and the one-year fixed deposit rate has been set at 1.15% for most banks [5][6]. Group 2: Impact on Banking Sector - The reduction in deposit rates is expected to lower banks' funding costs, thereby stabilizing net interest margins and enhancing their ability to support the real economy [8][12]. - Analysts suggest that the ongoing low interest rate environment may lead to a shift in deposits from large banks to smaller banks, which could affect the competitive landscape [8][12]. - The overall banking sector is entering a low interest rate and low spread cycle, with net interest margins for various types of banks showing a downward trend [10][12]. Group 3: Future Outlook - The adjustments in deposit rates are anticipated to lead to a decrease in overall deposit rates by approximately 0.11-0.13 percentage points, which may help stabilize banks' net interest margins [13]. - Despite the downward pressure on net interest margins, it is expected that the decline will not continue indefinitely, as measures to control funding costs are taking effect [12][13]. - The shift in deposit rates may also influence the allocation of bank assets towards bonds, potentially increasing demand in the bond market [8][13].

Summary of Key Points from the Conference Call Industry Overview - The conference call primarily discusses the monetary policy and bond market in China, focusing on the People's Bank of China's (PBOC) strategies and implications for the economy and financial markets. Core Insights and Arguments - The PBOC is likely to adopt a more accommodative monetary policy in response to a complex international economic environment and a recovering domestic economy that still requires consolidation [1][2] - The central bank emphasizes the balance between supporting the real economy and maintaining the stability of the banking system, indicating a potential reduction in deposit rates to sustain bank net interest margins, marking the sixth adjustment since April 2022 [1][2] - The market-oriented adjustment mechanism for deposit rates links them to the 10-year government bond yield and the 1-year Loan Prime Rate (LPR), resulting in a more significant decline in long-term deposit rates compared to short-term rates, which is beneficial for the long-term bond market [1][3] - The PBOC has clarified its future liquidity injection tools, elevating government bond transactions to a position equal to reserve requirement ratio (RRR) cuts, which will help lower bank financing costs [1][4] - The timing of the resumption of government bond transactions is crucial, as it directly affects market supply and demand, with expectations for the PBOC to resume purchases shortly to avoid passive withdrawal of base currency [1][5][6] - The 1-year government bond yield is considered a key indicator for observing whether the PBOC will resume government bond transactions, with a significant drop in yield suggesting large-scale purchases [1][7] - The PBOC highlights the importance of strengthening the bond market, noting that long-term government bonds carry interest rate and duration risks that investors must closely monitor [1][8] - The efficiency of pricing in China's bond market and the risk management capabilities of institutional investors are seen as areas needing improvement, with state-owned banks expected to play a more significant role in guiding market pricing [1][9][10] Additional Important Insights - The current structure of bond types shows a trend towards increased activity in long-term government bonds, with about 30% of trading volume concentrated in a small number of bonds, indicating potential liquidity improvements for less active bond types [1][11] - The PBOC identifies low inflation, particularly in core CPI, as a result of supply-demand imbalances, suggesting that monetary policy alone may not lead to price increases without coordinated efforts across various policy areas [1][12] - Future monetary policy is expected to remain accommodative, with a focus on further reducing social financing costs to support a more robust economy [1][13]