The main content of this news is at the beginning: in November of this year, dozens of small and medium-sized banks announced interest rate cuts, and major small and medium-sized banks followed the large state-owned banks in lowering deposit rates, with only a few small and medium-sized banks maintaining medium- and long-term deposit rates above 2%. Regarding this situation, we cannot help but be puzzled: why are the major state-owned banks and small and medium-sized banks lowering deposit interest rates? What are their motives? Why do some small and medium-sized banks not follow the trend of interest rate cuts in the banking industry and still keep deposit rates above 2%, and what are their considerations? Returning to the content of the news, how do banks respond to this rate cut? Following the steps of large state-owned banks to lower deposit rates can also be explained by the theory that banks are shedding “deposit” liabilities. But before that, there is another question: banks are independent entities, like different departments within a monopoly organization, competing for their own interests. There is fierce competition between large state-owned banks and other large banks, between small and medium-sized banks, and between large and small banks. This competition leads to a situation where, when one bank lowers deposit rates, others will try to maintain or even increase deposit rates to attract deposits leaving the rate-cutting bank. This is more obvious between small and medium-sized banks and large state-owned banks. Large state-owned banks have long operating histories, large scales, extensive branch networks, and closer relationships with the government. For these banks, in times of economic crisis, they need to defend; they do not need to raise deposit rates to attract deposits. The deposits lost are not a loss but a reduction of burden, easing the pressure from deposit interest payments. Even if they lose some deposits, they have enough funds to continue lending, ensuring their loan business. Moreover, large state-owned banks have a long-term, stable alliance with the bourgeoisie and the government. Their interests are intertwined, and a mere decrease in deposit interest rates is not enough to break their alliance. Therefore, they are more proactive about lowering deposit interest rates and are leading the trend. On October 18, 2024, six large state-owned banks proactively lowered their deposit rates based on current conditions and their operational needs. Among them, the five major banks (Industrial, Agricultural, Bank of China, Construction, and Bank of Communications) generally lowered their current deposit rates by 0.05% to 0.1%. The rates for fixed deposits of different terms were all lowered by 0.25%. After the reduction, the rates for 3-month, 6-month, 1-year, and 2-year fixed deposits were lowered to 0.8%, 1%, 1.1%, and 1.2%, respectively; 3-year and 5-year rates were lowered to 1.5% and 1.55%. Postal Savings Bank also slightly increased by 0.01% to 0.03%, setting new lows for deposit rates. However, for small and medium-sized banks, the impact of interest rate cuts is different. These banks mainly include local credit cooperatives and urban commercial banks, which have shorter operating histories, smaller scales, fewer branches, and less close ties with the government. The deposits they can attract within their business scope are very limited compared to state-owned banks, and they do not have the backing of the government to back them up; if they go bankrupt, they go bankrupt. Facing competition from large state-owned commercial banks, their few responses are high deposit rates, trying to attract more deposits within a limited time by raising deposit rates, so they can use these deposits to guarantee enough loans to survive under the pressure of competition from large state-owned banks. Currently, both small and medium-sized banks and large state-owned banks face the pressure of high deposit interest rates. If small and medium-sized banks lower their deposit rates like large state-owned banks, they will lose their competitive advantage, and after losing deposits, their loan business will be hard to sustain, ultimately leading to bankruptcy. This is why small and medium-sized banks do not follow the rate cuts as closely as large state-owned banks; their survival depends on it. They must wait for large state-owned banks to lower their rates, and once some deposits flow into small and medium-sized banks, stabilizing deposits, they can gradually reduce deposit interest rates. This explains why some small and medium-sized banks “follow” the rate cuts of large state-owned banks and why some still maintain rates above 2%. The latest announcement from Gao Ming Shun Silver Village Bank states that the interest rates effective from November 21 are: for individual and corporate fixed deposits of one year (over 200,000 yuan), 1.90%; for three-year fixed deposits, the benchmark rate is 2.75%, and for deposits between 50,000 and 100,000 yuan, the rate is 2.15%, with over 200,000 yuan reaching 2.30%. This verifies the deposit interest rate strategies of small and medium-sized banks. But this is only temporary. As the economic crisis worsens, the pressure on deposit interest rates increases, and the pace of small and medium-sized banks’ responses accelerates significantly. Not only are rural commercial banks and village banks actively adjusting, but previously slower private banks are also rapidly adjusting deposit rates with larger reductions. For example, Jiangxi Yumin Bank and WeBank have significantly lowered deposit rates. Jiangxi Yumin Bank’s three-year fixed deposit rate dropped from 2.25% to 2%. Some rural commercial banks and village banks have cut rates by as much as 80 basis points, far exceeding urban commercial banks. For example, Guangxi Shangsi Rural Commercial Bank’s one-year fixed deposit rate was lowered by 30 basis points to 1.7%, and three- and five-year fixed deposit rates were lowered by 75 and 80 basis points to 2.4%. In comparison, urban commercial banks mostly cut rates by 10 to 20 basis points. Besides lowering fixed deposit rates, they also adjust special deposit rates simultaneously, accelerating the rate cut pace. For example, Tianjin Bank announced on its official website that from August 5, it would adjust the Seagull deposit product rates, with 1-year and 3-year rates adjusted from 2.05% and 2.50% to 2.00% and 2.35%. In summary, when people deposit money in banks, banks pay a certain interest, and banks use deposits as loan funds to lend to society, earning interest on loans. The difference between deposit interest and loan interest is the bank’s profit source. Within a certain deposit range, the larger the interest rate spread, the more profitable the bank’s lending. Because deposit interest must be paid with loan interest, if loan interest remains unchanged or rises, and deposit interest falls, banks can earn more profit. Conversely, if loan interest falls and deposit interest rises or remains unchanged, bank profits decrease. Understanding this, it becomes clear that banks and depositors are opposite. For banks, deposits are liabilities, and loans are assets. When liabilities exceed assets, banks naturally seek to shed excessive “liabilities,” i.e., depositors’ “deposits.” Currently, as the economic crisis intensifies, small and medium-sized assets are earning poor investment returns, and the wages of the working masses are continuously declining. Overall social consumption capacity is shrinking. The past real estate bubble and militarization of the national economy have absorbed excessive capital into these sectors, leading to underinvestment in other areas, especially those closely related to people’s lives, causing distortions in production and worsening the crisis. The worsening crisis causes further contraction of production, reducing the willingness of both the masses and capitalists to borrow, while deposits continue to increase. People are unwilling to spend, capitalists are unwilling to invest, and social funds are left idle, creating a vicious cycle. This directly affects the net interest margin (the ratio of bank net interest income to total lending capital). In 2023, among 42 listed banks under the control of the regime, only Qingdao Bank saw an increase in net interest margin, while others declined, with the largest drop exceeding 0.4%. In the last quarter of 2023, the net interest margin reached 1.69%, the lowest in history. The decline in deposit interest rates signals the worsening economic crisis. The regime believes that as deposit interest rates fall, the masses will withdraw their money for consumption, stimulating economic activity. However, the reality of the crisis shows that it is not the masses’ reluctance to consume that causes the crisis, but the crisis that makes them unwilling or unable to spend. When people save money without spending, it is because of the severe oppression under capitalism; their deposits are small and scattered, unable to influence the entire economy. Those with large deposits are the exploiting classes. Forcing people to consume through interest rate cuts is wishful thinking by the regime. The regime’s theory is just good news for bad news, with no real effect on the crisis. The grand “Double Eleven” online shopping festival is a case in point: in 2020, Tmall extended it to 11 days; in 2021, the report changed from “sales volume” to “transaction volume,” reaching 540.3 billion yuan, encompassing all successful transactions. By 2022, Tmall no longer published GMV data for Double Eleven, only stating “this year’s Double 11 remained stable and good, with transaction scale comparable to last year.” This is the result of regime-led consumption stimulation. In fact, according to Baidu Index, the popularity of Double Eleven started declining in 2019, and has fallen for six consecutive years, even lower than in 2014. Although it started earlier this year, apart from extensive advertising, there is little discussion. The once grand event has visibly disappeared. On September 24, at a press conference, Pan Gongsheng, governor of the People’s Bank of China, announced an upcoming interest rate cut, with the 9/25 medium-term lending facility (MLF) rate dropping by 30 basis points. The decline in loan interest rates will inevitably follow deposit rate cuts. The regime uses this method to lower loan interest rates and increase lending while also lowering deposit rates to force the public to save less. The ultimate goal is to boost social consumption and reduce excess societal products, but essentially, it is “living off the future,” delaying the outbreak of the economic crisis, which will eventually explode more violently at a later time, leading to a political crisis for the regime. By then, the regime will have no way to prevent the revolution from arriving.
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