China’s $538 Billion Deposit Exodus Supercharges Bond Rally

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Years of stock market losses and a slumping property sector have eroded wealth and sapped the animal spirit of China’s army of retail investors. Photo: Bloomberg

(Bloomberg) — China’s efforts to bolster economic growth by reducing the allure of bank deposits has driven a record exodus from cash, with a big proportion of that going into bonds and wealth management products.

The nation’s total deposits slumped by 3.9 trillion yuan ($538 billion), or 1.3%, in April as investors looked for higher returns elsewhere and policymakers cracked down on companies that took advantage of preferential deposit rates to park cash at banks. One-year deposits at China’s largest banks pay a record-low of just 1.45%.