Chinese lenders are raising deposit rates to combat the fast-rising Internet finance which is robbing the country's large number of depositors with higher flexibilities and returns.
The China Construction Bank (CCB) recently eased controls by allowing its branches to decide the deposit rates while the Communications Bank of China (CBC) announced to lift deposit rates to the upper limits of the floating band ruled by the central bank.
The People's Bank of China (PBoC) in June, 2012 started to allow deposit rates to rise to 110 percent of the benchmark rate, a move which is expected to intensify competitions for depositors. The one-year benchmark deposit rate, however, was lowered to 3.25 percent from 3.50 percent.
The other three of the nation's "Big Five", the Agricultural Bank of China (ABC), the Bank of China (BoC) and the Industrial and Commerce Bank of China (ICBC) have all moved their deposit rates to the upper limit.
The one-year deposit rate at most will be 3.75 percent under the current rules, which is considerable lower than the expected returns offered by Internet finance products.
Yu'e Bao, a money fund product launched by Alibaba quickly wooed a large number of users since last June when it debuted. Size of the fund which offers an average annual return of over 6 percent and allows users to withdraw their money any time they want, hiked CNY250billion by the end of last year.
Leading Internet companies including Tencent, Baidu and NetEase also attempted to share a cake over the promising business by offering even higher returns.
China's household deposits added 5.49trillion yuan in 2013 on a yearly basis, compared with 5.71 trillion a year ago, PBoC statistics showed, suggesting a decline in popularity of conventional bank savings.
Analysts, however, believe the floating band is likely to be further widen, which will boost liquidity in the banking system and help push deposit rates higher.
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