Fintech Contributes to 3 Trillion Yuan Decline in Chinese Personal Current Accounts and Cash


The personal current account and cash components of China’s money supply have seen a precipitous decline over the past six months in tandem with a sharp increase in personal fixed-term deposits and deposits at non-bank financial institutions, as cashless transactions  and money market accounts surge in popularity.

Data on RMB lending released by China’s central bank for July points to a total decline in personal current accounts and cash in circulation of over 3 trillion yuan for the first half of 2017.

China’s personal current account balance was 23.81 trillion yuan in July, for a decline of 400 billion yuan compared to 24.21 trillion yuan in June, as well as a drop of 1.17 trillion yuan compared to 24.98 trillion yuan in January.

The fall in July was the third marked decline since the start of the year, following drops of 890 billion yuan and 690 billion yuan in February and April.

People’s Bank of China data further indicates that cash in circulation fell from 8.66 trillion yuan in January to 6.71 trillion yuan in July, for a decline of 1.95 trillion yuan.

This means that personal current deposits and cash in circulation fell from 33.64 trillion yuan in January to 30.52 trillion yuan in July, for a decline of approximately 3.12 trillion yuan in six months.

Personal current account balances and cash in circulation usually sees a pronounced decline by mid-year in China, given that the Spring Festival around the start of the year is the peak for spending.

However, the drop of 3.1 trillion yuan in July compared to January is over 20 times greater than the decline seen across the same period last year, which was a mere 150 billion yuan.

Personal term deposits and non-bank financial institution deposits see surge across same period

According to ChinaFundan imprint of the People’s Daily, this sharp decline in the personal current account balance and cash in circulation has been offset by a 2.9 trillion yuan increase in term deposits and deposits at non-bank financial institutions.

PBOC data indicates that personal term deposits and other deposits increased from 37.93 trillion yuan in January to over 39.5 trillion yuan by March.

Despite seeing a decline in July to 39.15 trillion yuan, personal term deposits and other deposits still remain 1.22 trillion yuan ahead of the figure for January.

ChinaFund says that the data indicates that many Chinese are shifting from cash and personal current accounts to fixed deposits at banks, with an increase of over 1 trillion yuan in the latter.

Deposits at non-bank financial institutions have also seen a large-scale increase since the start of the year, coinciding with the drop in personal current account balances and cash in circulation.

Non-bank financial institution deposits have risen from 12.83 trillion yuan in January to 14.5 trillion yuan as of July, for an increase of 1.67 trillion yuan, or a rise of 13%.

Data from small and medium-sized banks in China, such as joint-stock banks and municipal commercial banks, further indicates that deposits hailing from non-bank financial institutions are a key source of new deposits for these lenders.

Fintech and money market funds key factors behind cash decline

According to ChinaFund two other key factors account for the recent sharp decline in personal current account balances and cash – the surging popularity of cashless transactions throughout the Chinese consumermarket, as well as a sharp expansion in the assets of money market funds.

A recent survey by Ernst & Young indicates that Chinese consumers are world leaders when it comes to Fintech adoption, particularly when it comes to making mobile payments via their smart phones.

The “2017 Smart Life Index Report” (2017智慧生活指数报告) released by Tencent and Renmin University of China found that 84% of survey respondents had no problem leaving home without carrying any cash, as long as they had their smart phones.

The overwhelming majority of small retail transactions are now paid for using Fintech platforms such as WePay or AliPay, with analysts anticipating further declines in cash usage ahead.

Another factor contributing to the decline of cash in circulation has been the increasing popularity of money market funds in China, whose assets expanded to a record breaking $880 billion at the end of July.

According to analysts the vast majority of the 1.67 trillion yuan increase in non-bank financial deposits seen across the January to July period was the result of increases in money market funds.

A number of money market funds in China are also taking advantage of the latest Fintech innovations to provide T+0 settlement via smart phones, heightening their popularity by reducing the need to hold cash or use personal current accounts.

This means that when investors need cash, they can simply perform rapid settlement of their money market fund holdings via smart phones, in order to draw cash from an ATM within mere minutes.


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