(Yicai) Aug. 14 -- Chinese residents and companies drew down funds deposited with banks last month due to seasonal factors but also possibly because of early loan repayments or a pick-up in risk appetite amid low interest rates, according to experts.

Yuan-denominated deposits fell by CNY1.12 trillion (USD150 billion) in July from a year earlier, compared with an increase of CNY44.7 billion (USD6.2 billion) a year ago, according to the latest data from the People's Bank of China.

Household deposits fell by CNY809.3 billion (USD111.8 billion) and those of non-financial firms, such as manufacturers and service providers, fell by CNY1.53 trillion. But fiscal deposits, including by government departments and state-owned enterprises, rose by CNY907.8 billion, while the deposits of non-bank financial institutions, such as brokers and insurers, rose by CNY413 billion.

The fall in household and business deposits suggests that investors shifted funds to wealth management products as the new quarter began, while people are less keen on saving due to low interest rates and an increasing number of investment opportunities, said Ming Ming, chief economist at Citic Securities.

The drop in corporate deposits could be linked to the decline in loan financing, Ming said, and July is a major tax month, so tax revenues gave a seasonal boost to fiscal deposits. Due to the low comparative base last year, the year-on-year increase was higher, Ming added.

Wang Yunjin, a senior researcher at the Zhixin Investment Research Institute, put the decline down to early loan repayments. The CNY413 billion increase in the deposits of non-bank financial firms represented a CNY391.5 billion drop on a year earlier, suggesting that there is still much pressure to redeem funds such as WMPs, Wang said.

While the experts debate whether early loan repayments or a shift into wealth management products was the cause of the decline in July’s deposits, the market for WMPs sold by banks and financial institutions warmed a little last month after cooling in late June due to seasonal factors.

Ming estimated that funds invested in WMPs rose by CNY1.88 trillion, or 7 percent, in July to a two-year high of CNY27.22 trillion (USD3.76 trillion).

A report by China International Capital also estimated that banks sold CNY1.07 trillion of WMPs over the first 10 days of July, suggesting a recovery.

Analysts predict that the amount of funds held in WMPs will gradually pick up in the second half of the year, as people move money from deposit accounts to these financial products.

Editor: Emmi Laine