Chinese banks revive longer-term CDs as deposits mature

Chinese banks are bringing back three- and five-year large-denomination certificates of deposit, with some offering annualized interest rates of up to 2 percent, as they seek to retain customers' savings ahead of a wave of deposit maturities expected in 2026.

Hengfeng Bank announced on Oct 20 via its wealth management WeChat official account that it would issue seven CD products for individual customers, each requiring a minimum deposit of 200,000 yuan ($30,032). The five-year product offers an annualized interest rate of 1.75 percent.

Bank of Xizang began offering three-year CDs on Oct 16 at an annualized rate of 1.85 percent. Similarly, China CITIC Bank has been issuing eight CD products for individual customers since Oct 1, including a three-year product yielding 1.7 percent annually.

Several privately owned banks have also resumed offering medium- and long-term CDs. Shanghai Huarui Bank announced on Oct 22 via its WeChat account a limited-quantity CD product with an 18-month term and an annualized interest rate of 1.85 percent. The product is available only to customers in Shanghai.

In early October, Wuxi Xishang Bank also reintroduced three-year CDs for individual customers, offering an annualized interest rate of 2 percent. The product is available only to customers in Jiangsu province.

The renewed issuance marks a shift in the supply of bank deposit products in the second half of this year. Medium- and long-term fixed-term deposits, which had become less readily available, are gradually returning to the market, alongside a fresh wave of large-denomination CD launches.

Wang Pengbo, chief analyst at consultancy Botong Analysys, said relatively high market interest rates in previous years had prompted many households to allocate substantial sums to medium- and long-term fixed-term deposits, some of which are due to mature in 2026.

As these deposits come due, banks face mounting pressure to retain existing funds and prevent deposit outflows, creating an urgent need for products that can attract maturing savings, Wang said.

Smaller and medium-sized banks face particular challenges in retaining these funds, as depositors may move their money to larger banks or wealth management products if lenders fail to offer competitive rates or targeted retention measures, said Su Xiaorui, a senior researcher at Suxi Zhiyan, a Chinese financial technology research institution.

By reintroducing CDs with annualized interest rates of up to 2 percent, some smaller banks are seeking to retain core local depositors and reduce the risk of losing both deposits and customers, Su said.

Analysts said the ability to lock in interest rates over an extended period while maintaining some liquidity through transfers is a key attraction of large-denomination CDs in the current market for relatively low-risk investment products.

In June, the People’s Bank of China released the Administrative Measures for Large-Denomination Certificates of Deposit (Draft for Comments), proposing revisions to the existing interim rules governing the products. The draft explicitly allows both third-party platforms and banks’ own channels to facilitate CD transfers, early withdrawals and redemptions.

The regulatory framework continues to improve, transfer mechanisms become more established and banks face fewer operational hurdles in issuing CDs. These developments are likely to make the products more accessible and appealing to investors, Wang said.

Dong Ximiao, chief economist at Merchants Union Consumer Finance, said several factors are driving the return of five-year CDs.

With a peak in fixed-term deposit maturities expected in 2026, banks are preparing to prevent large-scale deposit outflows. Given the narrow interest-rate gap between three- and five-year products, reintroducing five-year CDs allows banks to retain deposits for an additional two years without significantly increasing their interest expenses.

Meanwhile, as investment returns continue to decline, many depositors are increasingly eager to lock in returns over the long term. Banks’ decision to resume issuing five-year CDs reflects both this growing demand and an effort to address an unmet need in the market, Dong said.

However, he emphasized that the move largely reflects the differentiated, short-term deposit-gathering strategies of individual banks based on their own circumstances, rather than a broad-based return of long-term CDs across the banking sector.