Analysis: China’s Great Savings Migration to Stocks

This year, as economic outlooks have improved and household appetite for risk has increased, a clear trend has emerged in China: households are moving their deposits from traditional savings products into the stock market. This shift, observable since May when equity markets began to rise, reflects broader changes in financial behavior and market conditions. Several key indicators support this trend: a rise in demand deposits, growth in equity-related financial products, a surge in nonbank deposits, and increased capital-market activity, including higher daily turnover in A-shares and growth in margin financing balances. Notably, the number of new accounts in the Shanghai Stock Exchange rose by 26% from May to July, indicating heightened interest, even if still below last year’s peak [para. 1][para. 2][para. 3][para. 4].

These changes largely originate from excess savings accumulated under conditions of easy liquidity and moderate credit growth. Unlike Japan in the 1990s, China’s M2 and total social financing growth remain robust at 7-8%. This has largely been facilitated by active government fiscal spending, strong countercyclical lending by banks, and a diminishing effect of financial disintermediation. Government fiscal policy’s role in deposit creation increased to 53% by July 2025 (from 25% at the end of 2023), while credit’s role dropped to 41% (from 73%) and the balance of payments’ contribution increased to 6% (from 1%) [para. 5][para. 6][para. 7].

The migration of deposits into equities is also driven by increased risk appetite among households—particularly after the government’s “Sept. 24” stimulus package and the emergence of new economic narratives. Middle- and high-net-worth groups have especially increased their investments in financial assets since last year’s equity rally. Additionally, the return on A-shares has reached a 12-month rolling average of around 20%, reminiscent of major market booms in 2009, 2014, and 2019, which were followed by extended periods of deposit migration into stocks. Further, the weakening U.S. dollar has led to repatriation of funds, with about $60 billion in U.S. stocks sold by Chinese mainland accounts as of May 2025. Persistently weak returns on real-economy investment (with private fixed-asset investment growth at -1.5% in July 2025) further push capital toward financial markets [para. 8][para. 9][para. 10][para. 11].

The potential magnitude of this migration is significant. As of July 2025, household deposits are about 160 trillion yuan, nearly four times the free-float market capitalization of A-shares (43 trillion yuan). Analysts estimate that 5-7 trillion yuan of household funds could move into stocks, possibly surpassing inflows seen in past rallies. This estimate considers: 1) about 5 trillion yuan in “excess savings” accumulated 2022-24; 2) about 7 trillion yuan in maturing three-year term deposits generated during the 2022-23 outflows; 3) a possible 5 trillion yuan net increase in household demand deposits if M1 continues strong growth; 4) up to 1 trillion yuan growth in nonbank deposits as deposits flow into brokerage and mutual fund accounts. The actual amount will be shaped by macroeconomic conditions and policy, with factors such as slower IPO frequency increasing the elasticity of nonbank deposits in this cycle. However, nuances such as purchases of bank deposits by bond funds or insurance institutions mean these figures should be used as reference points [para. 12][para. 13][para. 14][para. 15][para. 16].