The latest official data points to a sharp decline in the growth rate of Chinese household deposits over the past decade-long period as gains in consumption and loans outpace income rises.
Data from the People’s Bank of China (PBOC) that the deposit balance at Chinese financial institutions saw year-on-year growth of 8.3% in August, marking the first time since 1979 that the reading has fallen beneath 9%.
PBOC data further indicates that household deposits saw an increase of 346.3 billion yuan as of the end of August, reversing a decline of 290 billion yuan in July.
According to a report from Beijing Youth Daily this means that growth in household deposits has fallen from 18% to around 7% during the decade-long period from 2008 to 2018.
Analysts say that easing income growth amidst a slowing Chinese economy is one of the key reasons for the decline in household deposit growth, in tandem with accelerating consumption growth and heavy property borrowing
In the first half of 2018 China’s national per capita disposable income was 14,063 yuan, for a nominal YoY increase of 8.7% and an inflation-adjusted rise of 6.6%.
In the first half of 2017 national per capita disposable income was 12,932 yuan, for a nominal YoY increase of 8.8%, and an inflation adjusted rise of 7.3%, meaning real income growth decelerated by 0.7 percentage points in the first half of the current year.
Chinese consumption is outpacing growth in per capita incomes, total consumer product retail sales hitting 1.8 trillion yuan in the first half of 2018, for a YoY rise of 9.4%.
End consumption made a contribution of 78.5% to China’s economic growth in the first half, for a rise of 14.2 percentage points compared to the same period last year.
Xu Chengyuan (徐承远), chief analyst with Golden Credit Rating, also points out that household borrowing continues to outpace deposit growth, with lending to households as of the end of July seeing an increase of more than 10% since the start of the year, as compared to a rise in household deposits of around 6% across the same period.
Financial reports from Chinese banks indicate that real estate lending remains copious – especially amongst the big state-owned banks, with loan growth particularly pronounced in third and fourth-tier cities.
While investment in wealth management products (WMP) has long been a key area of household expenditure in China alongside home purchases and consumer spending, the launch of new asset regulations in tandem with heightened regulatory scrutiny has led to a contraction in this area since the start of 2018.
Data from the China Banking and Insurance Regulatory Commission (CBIRC) indicates that the bank WMP balance was 21 trillion yuan as of the end of June, as compared to 22.28 trillion yuan as of the end of May.
Most of China’s listed banks have seen declines in their WMP balances compared to the end of 2017, including China Construction Bank (-6.5%), China Merchants Bank (-4.4%), Everbright Bank (-12%), Bank of Hangzhou (-11.8%), Bank of Beijing (-10%), Bank of Ningbo (-7.6%), China Zheshang Bank (-10%), Guangzhou Rural Commercial Bank (-22%) and Shanghai Pudong Development Bank (-20%).