China's Major Banks Cut Deposit Rates to Spur Economic Growth

Five of China's state-owned banks announced cuts in deposit rates by 5-20 basis points, following a reduction in benchmark lending rates. This move, intended to support a struggling economy, may inspire other banks to follow suit, lowering funding costs and encouraging consumer spending despite potential impacts on profit margins.

Five of China's major state-owned banks have announced reductions in deposit rates, ranging from 5 to 20 basis points, just days after surprising markets with lower benchmark lending rates aimed at driving economic growth.

The Industrial and Commercial Bank of China (ICBC), Agricultural Bank of China (AgBank), China Construction Bank, Bank of China, and Bank of Communications implemented these cuts, marking the first broad reduction since December last year. Three similar cuts were made earlier in 2023.

Additional banks are likely to follow the lead of these state-owned lenders after China recently reduced both short and long-term interest rates by 10 basis points. The reduction in deposit rates aims to ease funding costs for banks under economic pressure from a property crisis, weak loan demand, and record-low interest margins, in hopes of inciting consumer spending.

(With inputs from agencies.)