Case builds for China's banks to cut deposit rates
SHANGHAI/SINGAPORE -China's banks will cut deposit rates soon as part of efforts to make mortgages more affordable and revive property demand, analysts reading China's cryptic policy messages reckon.
Like in previous instances of monetary easing, major state-owned banks might take the lead in cutting deposit rates, setting off a chain of such cuts, two banking sources told Reuters. Lowering deposit rates will give banks much needed wiggle room to cut mortgage rates. "At the current stage, the biggest uncertainty lies in the contradiction among the narrowing net interest margins at banks, supporting the real economy and maintaining financial stability."
It speaks to the state of the economy, struggling to grow after three years of strict COVID restrictions and regulatory crackdowns, and the systemic risks to bank balance sheets from the debt burdens of property firms and local governments. Zhu Qibing, chief macro analyst at BOC International China, estimates the weighted average rate of new mortgages is 4.11%, while the average rate on all existing mortgages is at least 100 basis points higher.
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