The Chinese banking system saw an unusually large contraction in deposits in the month of April, well ahead of declines normally induced by customary seasonal factors.
The month of April saw the renminbi deposits of Chinese financial institutions contract by 725.2 billion yuan, according to data released by the Chinese central bank.
This included a decline of 1.57 trillion yuan in household deposits and a decline of 355.6 billion yuan in non-financial enterprise deposits, that was offset by an increase in fiscal deposits of 577.7 billion yuan and an increase in the deposits of non-banking sector financial institutions of 526.8 billion yuan.
Domestic analysts point out that while household deposits tend to contract markedly in on-month terms during the first months of the second to fourth quarters, the contraction in April marked a new record high.
Chinese households choosing to shift deposits to investment funds, as well as strong real estate sales, are believed to have further exacerbated standard seasonal factors that contribute to deposit declines.
“Looking at the experience of prior years, deposits often see an on-month slide in April,” said Zhou Maohua (周茂华), financial market analyst with China Everbright Bank to 21st Century Business Herald.
“However, in April this year the scale of the decline in deposits at the big banks was larger than in previous years, and we cannot rule out the influence of the big banks placing continued pressure on structured deposits, and some small and medium-sized banks using structured deposits to absorb [funds].”
At the end of April the structured deposit balance of China’s small and medium-sized banks stood at 2.397367 trillion yuan, for an increase of 53.885 billion yuan compared to the end of March, reverse a prior trend of decline following a crack down on use of the products launched in the middle of 2020.