Core Viewpoint - The article discusses the recent trends in deposit growth and asset allocation in the context of a recovering capital market, suggesting that the notion of "deposit migration" to the stock market may not be entirely accurate, as it reflects a redistribution of deposits among different entities rather than a net decrease in deposits [3][4]. Group 1: Deposit Trends - The People's Bank of China (PBOC) reported that the slowdown in deposit growth is linked to the adjustment of asset allocation, influenced by interest rate dynamics [3][4]. - Experts indicate that the term "deposit migration" is misleading, as it represents a reallocation of deposits among individuals, enterprises, and non-bank institutions rather than an overall decline in deposits [3][4]. Group 2: Interest Rate Dynamics - The article emphasizes the importance of maintaining a reasonable interest rate relationship across various asset classes, which guides macroeconomic equilibrium and resource allocation [4]. - The market-oriented interest rate system facilitates the flow of funds towards higher return opportunities, thereby influencing investment activities across banking, bond, stock, and insurance markets [4]. Group 3: Investor Behavior - Investors are motivated to maximize returns by converting savings into other assets, particularly when deposit rates decline, leading to increased interest in wealth management products [5]. - Recent trends show a decrease in household deposits and an increase in non-bank deposits, primarily due to regulatory changes affecting interbank demand deposit rates, with non-bank entities favoring time deposits and interbank certificates [5].

Core Insights - Recent slowdown in resident deposit growth and increase in non-bank deposits are primarily linked to prior regulations on interbank demand deposit rates [1][2] - The concept of "deposit migration" to the stock market is viewed as a reallocation of deposits among different entities rather than a net decrease in total deposits [1] - The People's Bank of China emphasizes the importance of maintaining reasonable interest rate relationships for macroeconomic balance and resource allocation [1][2] Group 1 - The capital market recovery has led some market institutions to interpret the slowdown in deposit growth as a shift of deposits to the stock market [1] - Experts argue that the term "deposit migration" is not entirely accurate, as it reflects a redistribution of deposits rather than a decrease in total deposits [1] - The increase in stock market value relative to deposits is noted, as rising stock prices elevate the total market capitalization of equities [1] Group 2 - The central bank indicates that changes in return rates and price relationships among different assets guide the flow of funds towards higher returns, impacting various financial markets [2] - Investors tend to convert savings into other assets when deposit rates decline, often resulting in investments in wealth management products, which still predominantly lead to interbank deposits or bonds [2] - The trend of slowing resident deposit growth and increasing non-bank deposits is attributed to previous regulations on interbank demand deposit rates, with non-bank entities favoring term deposits and interbank certificates [2]

Core Viewpoint - The People's Bank of China (PBOC) announced a 10 basis points reduction in the Loan Prime Rate (LPR) on May 20, marking the first interest rate cut of the year, which is expected to lower the overall financing costs for the real economy and stabilize the net interest margin of commercial banks [1][9][10]. Summary by Sections Interest Rate Changes - The LPR was reduced from 3.0% to 2.9% for first-time homebuyers, which translates to a total interest savings of approximately 38,600 yuan over a 30-year mortgage for a loan of 2 million yuan [1][3]. - Multiple banks, including China Construction Bank, China Merchants Bank, Industrial and Commercial Bank of China, and Agricultural Bank of China, have announced reductions in deposit rates, with the most significant cuts being 15 basis points for various term deposits [5][6][7][8]. Impact on Financing Costs - The reduction in LPR and deposit rates is expected to further decrease the comprehensive financing costs for the real economy, thereby reinforcing the economic fundamentals [3][10]. - The PBOC's adjustment of the 7-day reverse repurchase rate from 1.50% to 1.40% is anticipated to influence various market rates, including the LPR and deposit rates, promoting consumption and investment [9][10]. Banking Sector Response - The banking sector is responding to the PBOC's policy changes, with state-owned banks typically leading the way in adjusting deposit rates, followed by joint-stock and smaller banks [10]. - The net interest margin of commercial banks has been under pressure, declining to 1.43% in the first quarter of this year, which is below the regulatory acceptable level of 1.80% [10].