Core Insights - A significant financial phenomenon is occurring in China, where banks, once seen as a safe haven for national savings, are experiencing unprecedented "capital migration" [1] - The growth rate of national resident deposits fell to a near ten-year low of 3.2% in Q2 2025, down from 5.9% in the same period of 2024, indicating a substantial shift in financial behavior [1][3] - The net outflow of resident deposits reached 786.5 billion yuan in the first half of 2025, 2.3 times that of the same period in 2024, marking the first time since 2010 that deposits have seen consecutive quarterly net outflows [3] Factors Driving Capital Migration - Continuous decline in interest rates is a key driver, with the average one-year fixed deposit rate dropping to a historical low of 1.65% in June 2025, resulting in negative real interest rates when adjusted for inflation [3] - In contrast, the average annualized yield of bank wealth management products rose to 3.7% in Q2 2025, up 0.8 percentage points from the previous year, attracting funds away from traditional savings [3] New Investment Directions - Funds are diversifying into five main areas, reflecting a shift in investment strategies [4] 1. **Wealth Management Products**: The scale of wealth management products reached 31.7 trillion yuan in H1 2025, a 15.3% increase from the end of 2024, with equity and mixed products surpassing 50% for the first time [5] 2. **Stock Market**: The Shanghai Composite Index rose by 18.7% in H1 2025, attracting significant capital inflow, particularly from younger investors aged 30 and below, who accounted for 41.6% of new A-share accounts [6] 3. **Real Estate Market**: New home sales in first-tier cities grew by 12.3% in the first five months of 2025, indicating a recovery trend despite the overall market adjustment [7] 4. **Insurance Market**: Life insurance premium income reached 2.1 trillion yuan, a 22.5% year-on-year increase, with annuity and health insurance seeing rapid growth [9] 5. **Overseas Asset Allocation**: Personal foreign exchange purchases reached 56 billion USD in H1 2025, a 17.3% increase, reflecting a growing interest in overseas investments [11] Changing Investment Behavior - The shift in capital flow is characterized by generational differences, with younger generations (post-85 and post-90) leading the trend of reducing bank deposits in favor of equity assets, while older generations remain more conservative [12] - This transformation in investment philosophy indicates a move from traditional savings to a more diversified asset allocation approach, reflecting an increase in financial literacy among residents [12][14] Implications for Financial Institutions - The outflow of deposits poses challenges for banks, with the net interest margin dropping to 1.72%, the lowest on record [13] - In response, banks are innovating products, such as AI-driven wealth management solutions, to attract and retain customer funds [13] - The shift towards diversified asset allocation is seen as a positive signal for the financial market's deepening and the enhancement of residents' financial literacy [13][14]