Why Chinese Banks Aren’t Worried About Depositors Fleeing
The country’s savers have learned the hard way that safety matters more than yield.
Illustration: George Wylesol for Bloomberg Businessweek
Now that US savers have noticed they can get much better returns elsewhere, they’re pulling money out of their bank accounts. This year, assets held by money-market funds soared by about $530 billion, to $5.3 trillion, as bank deposits tumbled.
This is something new in the US—a result of the Federal Reserve starting to raise interest rates in March 2022 after keeping them near zero for more than a decade. But Chinese banks have long grappled with the problem. The People’s Bank of China has maintained its benchmark deposit rate artificially low at 1.5% since 2015, opening the door for wealth management products offering higher rates to lure savers. In 2017 a repository set up by Alibaba Group Holding Ltd.’s fintech affiliate, Ant Group Co., for leftover cash from online spending became the world’s biggest money-market fund, with assets hitting $270 billion.