(Yicai) Jan. 19 -- The interest rates on newly issued certificates of deposit with maturities of under one year have generally fallen below 1 percent at most Chinese lenders.

Most CDs with maturities of less than one year issued this month carry interest rates of under 1 percent, while those with maturities of one year and three years have interest rates of below 1.5 percent and 2 percent, respectively, according to data from nearly 50 banks compiled by the China Foreign Exchange Trade System.

Financial institutions estimate that about CNY75 trillion (USD10.77 trillion) worth of deposits will mature this year.

The maturities of CDs are also lowering together with interest rates. Most banks advertise products with up to one-year terms, and those with terms of five years have disappeared from the market. For example, China Construction Bank only offers CDs with tenors of no more than one year, while Bank of China has CDs with maturities of six months and one, two, or three years.

Most Chinese CDs have a minimum threshold of CNY200,000 (USD28,720), but more expensive products have also appeared on the market. For example, Industrial and Commercial Bank of China launched a three-year CD with an annual interest rate of 1.55 percent and a minimum deposit amount of CNY1 million (USD143,600). It has already sold out.

Another recent trend is the shift of funds to small- and medium-sized banks with higher interest rates from larger banks with lower interest rates, Yicai learned from depositors.

“A CNY300,000 three-year deposit with an interest rate of 1.65 percent at a big bank yields CNY14,850 (USD2,130) in interest,” Li Wei, a depositor in Shenzhen, told Yicai. “The same deposit has an interest rate of 1.85 percent at a city commercial bank and earns an extra CNY1,800 in interest.”

Li now plans to combine her year-end bonus with the money from maturing deposits to make a CNY500,000 deposit at a nearby city commercial bank, she said.

Some banks are trying to retain existing funds and attract new depositors by temporarily raising interest rates. For example, Guangdong Huaxing Bank recently launched a three-year CD with an annual interest rate of 1.95 percent for new customers. Some private banks are also offering CDs with annual interest rates above 2 percent for specific clients.

Given banks’ interest margins, the trend of lowering deposit costs is expected to continue, said Ming Ming, chief economist at Citic Securities. However, considering that deposit rates are already at a low level, the pace of future cuts may slow down, he noted.

Besides directly lowering interest rates, banks will also adopt measures such as reducing long-term, high-yield products and raising the minimum deposit thresholds for high-interest deposits, Ming predicted.

Compared with CDs, money market funds maintain a certain yield advantage. The average yield of money market funds was 1.12 percent last year, according to data from Wind Information. Their scale grew to CNY14.66 trillion (USD2.1 trillion) at the end of the third quarter of last year from CNY13.2 trillion at the beginning of the year, per the Asset Management Association of China.

Editor: Futura Costaglione