Chinese Banks Likely to Cut Deposit Rates

(Reuters) – Chinese banks are set to cut rates on 300 trillion yuan ($42.20 trillion) of deposits as soon as this week, Bloomberg News reported on Tuesday, citing sources familiar with the matter.

Major banks, including the Industrial & Commercial Bank of China and China Construction Bank Corp, will be guided by the central bank's interest rate self-disciplinary mechanism to lower rates on a range of deposit products.

Rates on one-year time deposits may decrease by at least 20 basis points (bps), while rates on longer tenors could drop by at least 25 bps, according to the report.

The major banks did not immediately respond to a Reuters request for comments.

In September, People's Bank of China Governor Pan Gongsheng stated that the central bank would further reduce deposit rates by 20 to 25 bps. If implemented, these cuts would mark the second round of across-the-board reductions this year, following those in July.

This measure aims to alleviate banks' profitability pressure after the nation lowered mortgage rates and benchmark lending rates as part of its stimulus package to revitalize the economy from deflation.

Chinese lenders are already facing challenges due to weak loan demand and increasing bad debts amid the broader economic slowdown and ongoing issues in the property sector.

($1 = 7.1091 Chinese yuan renminbi)