When Chengdu entrepreneur Linda Lin checked her mobile banking app during this year’s Grain in Season period, she discovered a sobering reality – the 3-year jumbo certificate of deposit (CD) rate at China Construction Bank had quietly dropped to 1.55%. “Last year I could still find products yielding 2.1%,” Lin lamented. “Now my 200,000 yuan deposit will earn 2,000 yuan less over three years.” Her frustration reflects a nationwide trend as China’s loan prime rate (LPR) continues its downward trajectory.
Widespread Cuts Across Banking Sector
Major state-owned banks have uniformly set 3-year jumbo CD rates at 1.55%, approximately 80 basis points lower than last year. Construction Bank has removed its 2-year and 5-year products entirely, offering only a 1-year option at 1.2%.
Joint-stock banks show similar patterns, with most products now yielding below 2%. China Merchants Bank and CITIC Bank both offer 1-year and 2-year jumbo CDs at 1.4%. Industrial Bank maintains a 1.75% rate for 3-year products but imposes strict purchase limits, with available quotas frequently below 10 million yuan.
Even traditionally high-yielding regional banks are cutting rates or discontinuing products. Tianjin Bank recently reduced rates on its 3-year and 5-year products by 5-30 basis points, while Blue Ocean Bank and Zhongbang Bank implemented cuts of 10-40 basis points across various terms.
Alternative Investments Gain Appeal
As jumbo CD yields decline, investors are turning to:
- Time deposits: Some city commercial banks offer 3-year time deposits at 1.85%, surpassing jumbo CD rates at larger institutions
- Money market funds: Yu’ebao’s top 7-day annualized yield reaches 1.3%, with Tianhong Yu’ebao maintaining 1.19%-1.25% on its 800 billion yuan portfolio
- Government bonds: May’s savings bonds offered 1.93% for 3-year and 2.0% for 5-year terms, outperforming comparable bank products by 40 basis points
Regulatory Pressure and Strategic Shifts
The moves come as China’s banking sector faces unprecedented margin pressures. Q1 2025 data from the National Financial Regulatory Administration shows:
- Net interest margins compressed to 1.43%, down 9 basis points quarterly
- Non-performing loan ratio edged up to 1.51%
- Deposit growth outpaced loan growth, with household deposits accounting for 80% of new deposits
“Banks are rebalancing their liability structures to reduce interest rate risk exposure,” explained a senior banking analyst. “Cutting long-term jumbo CD rates creates room for loan rate reductions that support the real economy.”
The People’s Bank of China’s May 2025 reverse repo rate cut to 1.4% has lowered overall funding costs by approximately 10 basis points, accelerating the transition away from high-cost liabilities.
Industry Transformation Underway
Financial institutions are adopting new strategies:
- Shifting from price competition to service differentiation
- Developing structured deposits and cash management products as jumbo CD alternatives
- Encouraging migration to wealth management products
“This rate inversion phenomenon will likely persist as banks prioritize wealth management services,” noted Su Xiaorui, senior researcher at Suxi Intelligence. For investors, the new landscape demands careful reassessment of risk-return profiles across available savings and investment vehicles.
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