China's Retail Investors Scramble for Yield as Deposit Rates Enter "1% Era"

AsianFin -- As bank deposit rates in China continue their downward slide, retail investors are flocking to wealth management products and alternative investments in search of returns once easily earned from savings alone.

Fixed deposit rates at Chinese banks fell across the board in May, with longer-term products entering what analysts are calling the 「1% era,」 according to a report from Rong360 Digital Technology Research Institute. The average rate for a 3-month deposit stood at just 1.004%, while 5-year terms offered 1.573%, highlighting the vanishing appeal of traditional savings.

The rate compression has triggered a surge in demand for bank-issued wealth management products yielding over 3% annually — demand so intense that some investors liken it to buying concert tickets. Banks are now innovating aggressively, making wealth management a core revenue engine. In 2024, net profits at wealth management subsidiaries jumped 8.56% year-on-year, according to company filings.

「Products with stable yields above 3% are gone the moment they』re released,」 said Rain Mo, a financial blogger, adding that many investors are now prioritizing short lock-in periods and high recent returns, rather than annualized rates since inception.

For now, banks with strong retail channels are gaining ground. Ping An Wealth Management has partnered with over 50 banks to expand distribution, while Postal Savings Bank Wealth Management grew off-bank distribution by 98.1% last year. Products distributed through third-party channels are under stricter performance monitoring and often outperform those sold by originating banks, industry analysts say.

China』s overall wealth management product balance hit 31.29 trillion yuan ($4.3 trillion) by end-May, up 350 billion yuan from April, driven almost entirely by fixed-income offerings, according to Huatai Securities. The one-month yield for bank WMPs stood at 2.52%, holding steady despite another benchmark deposit rate cut in May.

With bond yields compressing and equity markets still volatile, some investors are shifting focus to Hong Kong stocks. Pop Mart and the Hang Seng Tech Index have attracted considerable interest. Pop Mart shares have soared over 160% this year, and 207 public funds now hold positions in the toy company, data shows. 「My dream is to lie flat in Hang Seng Tech and Pop Mart funds,」 wrote one investor on social media.

Equity funds with exposure to undervalued Hong Kong assets and new consumption themes are gaining favor, while high-dividend mainland stocks are becoming safe-haven alternatives in the low-rate environment. ETFs with low fees and broad exposure have also emerged as investor favorites.

Meanwhile, public mutual funds and private fund assets continue to expand. Total mutual fund assets reached 32.03 trillion yuan at the end of May, up 10% year-on-year. Private fund registrations also soared, with new securities-focused vehicles up 115% from a year earlier, according to the Asset Management Association of China.

Foreign currency products and gold are also attracting interest. Savers with overseas plans are exploring currency diversification, though analysts caution that forex-linked wealth management carries exchange rate risks and conversion fees.

Looking ahead, investors are turning to hybrid strategies — combining staggered fixed deposits with equity and bond investments to optimize yield and liquidity. 「In a low-rate era, you have to stay flexible and informed. What worked yesterday won』t work today,」 said Yu Mo, a veteran investor.