Chinese Banks Grapple with Deposit Losses Amid Regulatory Changes

Beijing, – Chinese banks reported a significant loss of deposits totaling 3.92 trillion yuan (US$542 billion) in the month of April 2024. This stark decline follows regulatory directives aimed at curtailing the long-standing practice of offering additional interest to depositors, as reported by MENAFN.
The People’s Bank of China (PBoC) revealed that new renminbi deposits experienced a staggering 51% plummet to 7.32 trillion yuan in the initial four months of 2024, compared to 14.93 trillion yuan during the same period last year. Correspondingly, new renminbi loans also witnessed a notable decline, dropping by 10% to 10.19 trillion yuan from 11.32 trillion yuan over the same timeframe.
Despite the gravity of these figures, reports analyzing the situation were conspicuously absent from social media platforms. Bloomberg noted the disappearance of at least seven research reports from Chinese securities firms on WeChat, citing unspecified breaches of regulations governing public accounts.
This downturn in the financial landscape echoes earlier concerns highlighted by the South China Morning Post in a November 2023 report, which underscored cases of financial misconduct and the burgeoning issue of ‘hidden debt’ among local-level governments and state-owned banks.
The PBoC’s recent announcement regarding China’s total social financing for the first four months of 2024 painted a sobering picture. Aggregate Financing to the Real Economy (AFRE) stood at 12.73 trillion yuan, marking a significant decrease of 3.04 trillion yuan compared to the corresponding period last year. Notably, April saw a rare decline of 200 billion yuan, the first such occurrence since 2005.
This unfavorable credit data exerted pressure on the onshore Renminbi, which depreciated to 7.2347 per US dollar on Monday, reaching a two-week low. Analysis by Asia Times, utilizing econometrics algorithms, indicated that while China’s AFRE figures for April appeared weak before seasonal adjustment, they remained within normal bounds. Subdued lending in the property sector was cited as a contributing factor.
Despite the challenges, there are glimmers of optimism. Research from Minsheng Securities suggests that the relaxation of property regulations could potentially stimulate economic growth and lead to a resurgence in AFRE figures.
Significantly, several second-tier cities including Hangzhou, Xian, and Fosan independently announced the removal of property purchase restrictions from May 9 onwards. This move triggered a surge in property stocks, with companies like Shimao Group Holdings and China Aoyuan experiencing notable increases in share prices.
In conclusion, while the recent financial data presents challenges for Chinese banks and the broader economy, there are indications that strategic regulatory adjustments and regional policy changes could pave the way for a more resilient financial landscape in the future. MENAFN