Recent data from the People's Bank of China reveals that household deposits fell by 630 billion yuan in July, marking a significant shift in how residents manage their savings. As time deposits mature, savers are increasingly asking whether to renew or redirect their funds elsewhere. The answers vary widely among depositors interviewed, with many moving money into insurance, funds, wealth management products, or even directly into the stock market, while others remain committed to fixed deposits or opt for the flexibility of demand deposits due to uncertainty about investment options.
Central bank figures confirm that the trend of deposits leaving banks persists, though at a slower pace. Non-bank financial institution deposits grew by 1.11 trillion yuan in July, but this represented a year-on-year decline of 1.03 trillion yuan. These deposits primarily reflect funds held by securities firms, insurance companies, funds, and wealth management products at commercial banks. Industry analysts suggest the deceleration in deposit outflows may be a temporary response to market volatility, but the broader shift from bank deposits to diversified asset management products is expected to continue given persistently low deposit rates.
Why are deposits leaving banks? The answer from multiple depositors is straightforward: deposit rates are simply too low. One former cross-city deposit hunter noted that rates had fallen from around 2.6% to below 2%, making traditional deposits less attractive. She has already moved away from bank deposit-based wealth management and plans to use bank wealth management products instead. Another retiree in her sixties, once a loyal deposit customer, now keeps a smaller share of her savings in deposits because locking money away for years at current rates no longer makes financial sense.
Data from Rong360 Digital Technology Research Institute shows deposit rates continuing to decline, with rates on lump-sum deposits and certificates of deposit across maturities from three months to three years falling month-on-month in July. However, not everyone is abandoning deposits. An elderly depositor in her seventies explained that she finds wealth management products too complex and considers deposits the only safe option. A wealth management professional at a joint-stock bank noted that while some customers remain rate-insensitive, particularly older individuals with lower risk tolerance, a growing number are choosing not to renew maturing deposits as rates fall.
The decline in household deposits also stems from sluggish retail lending growth. Loans create deposits, so weaker loan demand reduces the deposits that typically result from borrowing. In July, resident loans decreased by 460.3 billion yuan year-on-year, with short-term loans down 340 billion yuan and medium-to-long-term loans down 120.2 billion yuan, indicating significant downward pressure on household borrowing.
Why has the pace of deposit migration slowed? Market turbulence has led to divergent investment strategies, with residents spreading funds across multiple asset classes to pursue better returns. The seesaw effect between household deposits and non-bank deposits is evident, as the 1.11 trillion yuan increase in non-bank deposits in July suggests funds moved into securities, insurance, funds, and wealth management products. One depositor described splitting her maturing deposits among stocks, funds, and bank wealth management products to chase better yields, though recent volatility has hurt her returns, with technology stocks purchased in June already down about 10%.
Market fluctuations have made investors more cautious. Data from Wind shows the Shanghai Composite Index fell 3.17% over the 60 days through August 17, while the Shenzhen Component Index dropped 5.73%. Wealth management products and funds have experienced floating losses. Analysts at China Securities and China International Capital Corporation attribute the slower deposit migration to weaker capital market performance in July compared with the same period last year, reducing the appeal of shifting funds into non-bank assets.
Tian Lihui, dean of the Financial Development Research Institute at Nankai University, notes that the core driver of declining household deposits remains the persistent fall in deposit rates, prompting savers to seek higher-yielding alternatives. However, the momentum has slowed, with last July's surge in wealth management product expansion and fund subscriptions not repeating this year. This suggests residents' risk appetite has not risen as markets anticipated, and the flow between banks and non-bank institutions is evolving from a one-way shift to a two-way tug-of-war.
The divergence in deposit migration is widening amid market volatility. A financial planner at a joint-stock bank observed that the enthusiasm for moving funds into stocks has diminished compared with the start of the year, with clients increasingly divided in their approaches. Some aggressive investors are withdrawing money from deposits and even insurance to buy at lower prices, while others prefer keeping funds in demand deposits because they are unsure how to invest or believe that not losing money counts as winning in the current environment.
Tian adds that last year's deposit migration was relatively concentrated, primarily flowing into wealth management products and bond funds, reflecting an extension of low-risk preferences. This year, however, residents are making more nuanced marginal allocations across deposits, wealth management products, insurance, and equities rather than rushing into a single asset class. Latest data show insurance premium income reached 3.86 trillion yuan in the first half of the year, up 3.3% year-on-year, while bank wealth management products totaled 33.66 trillion yuan, up 9.75%. A-share new accounts opened in July reached 2.6554 million, up 35.23% year-on-year but down 7.30% month-on-month.
Banks are responding by reintroducing five-year certificates of deposit to retain customers. A bank relationship manager noted that deposits still account for over 70% of client assets under management, but the pressure to retain deposits remains intense given low rates. In recent months, more banks have resumed offering five-year time deposits and large-denomination certificates as a retention strategy.
Tian predicts that deposit migration in the second half of the year will be more actively driven, depending on whether equity market returns can sustain their appeal, whether wealth management product yields remain attractive, and whether macroeconomic data improves residents' risk appetite. While the total volume of deposit outflows will slow noticeably, structural migration will persist, with funds gradually moving from low-interest demand deposits and short-term fixed deposits toward higher-yielding alternatives in a low-intensity, long-cycle pattern.
For ordinary investors navigating a divided market with low rates, volatile equities, and a still-stabilizing property sector, experts offer cautious advice. The era of earning stable returns by blindly investing in a single asset class has ended. In a differentiated market, balanced allocation and discipline matter more than predicting direction. Investors should lower expectations, accept the reality of lower returns in a low-rate environment, avoid excessive risk-taking or leverage, extend duration to lock in certainty while rates still have room to fall, and maintain flexibility by not over-committing to any single equity sector. A barbell strategy pairing technology growth with high-dividend stocks can provide both upside potential and downside protection.
Experts also recommend adhering to broad asset allocation principles, balancing stocks and bonds according to personal risk tolerance, building a solid foundation with fixed-income products, and moderately engaging with equities while focusing on growth sectors with solid industrial logic. Given the current sell-off in technology stocks, adding defensive, low-volatility dividend stocks can help hedge against market swings. Proper position management, avoiding impulsive buying and selling, maintaining a long-term perspective, and not being swayed by short-term market movements are essential strategies for navigating today's complex investment landscape.
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