China’s privately run banks are using online finance platforms to sell deposit products that provide exorbitant rates of return compared to the established large-scale lenders.
A report from Securities Daily indicates that the deposit products of many private banks in China are appearing in eye-catching places on internet finance platforms under sections with titles such as “hot sales lists” (热销榜) or “novice recommendations” (新手推荐).
According to the report most of these products offer annualised rates of return in excess of 4%, with some approaching 5%, or even over 7% when the “subsidies” offered by online finance platforms are included.
The minimum quota for these deposit products can be extremely low – as little as 50 yuan for some products, while the terms provided are highly flexible.
One 30-day deposit product offered by an online finance platform in China sets a minimum investment amount of 1000 yuan (approx. USD$150.00) with an annual rate of 4.35% – yet the “subsidy return rate” offered by the platform brings the annualised rate of the product to as high as 7.35%.
JD.com’s wealth management platform offers another deposit product with a rate of return of 2.175%, yet if the product held for 100 days to one year, an award rate of 4.85% is provided for the first 100 days. If the deposit is held for one year this award rate rises to 6.675%.
The rates for these online deposit products offered by China’s private banks are far higher than those provided by the country’s far-larger established lenders.
The rate for a one-year fixed-term deposit of 10,000 yuan is currently 1.95%, while this rates rises to 2.52% for a two year deposit and 3.3% for a three year deposit.
The “special deposit products” offered by the larger Chinese banks via their mobile banking apps generally offer maximum rates of around 3%.