China's Savers Wise Up to Above-Market Rates

Lin Baozhen, a 61-year-old retired accountant in Shanghai, was a dream customer for Chinese banks. For a decade she kept her money at China Construction Bank in an account currently paying 3.5 percent interest. No more. This month, Lin moved half her 800,000 yuan ($127,000) savings into a 95-day investment product offered by the bank that guarantees the principal and pays 5.5 percent annualized returns. That’s one percentage point above the latest inflation rate. “I am not investment-savvy, but it would be stupid of me if I just leave the deposits there doing nothing,” says Lin in the lobby of her bank branch in Pudong. “The math is simple. I need something safe and with a return that can at least beat inflation.”

Lenders are going all out to keep savers such as Lin who are no longer content with interest rates that don’t keep pace with rising prices—even if it means taking losses on the accounts. Shenzhen Development Bank is giving away gold necklaces from Hong Kong jeweler Chow Tai Fook to those willing to park at least 600,000 yuan with the bank, according to Ke Jieru, a manager at the bank’s Shanghai branch. Such depositors will also be eligible to buy a 90-day investment product with an expected annual return of 6.6 percent, she says. Bank of Communications, based in Shanghai, is granting its best customers, those investing at least 500,000 yuan over three months, a 5 percent discount on the five-year benchmark lending rate of 7.05 percent when buying their first homes.