Where should I put the temporarily unused money?

This once thought simple financial question is becoming difficult to answer.

Ms. Xu from Beijing chose two methods: depositing 300000 yuan into the bank; I have about 300000 yuan left to buy gold, but currently I am suffering a huge loss. Her friend, seeing the deposit interest rate continuously decreasing, decided to directly put the money in the bank's current account.

Four years ago, 300000 yuan was deposited into a state-owned large bank, with an annual interest rate of 7800 yuan calculated based on the listing interest rate of 2.60% for three-year fixed deposits. According to the current listing interest rate of 1.25%, the annual interest on the same amount of money is about 3750 yuan. In just a few years, the "returns" on deposits have been halved.

Taking the deposits of state-owned banks as an example, after the interest rate reduction in May 2025, the one-year, three-year, and five-year interest rates will be 0.95%, 1.25%, and 1.30%, respectively.

The fixed deposit interest rate has entered the "1% era". In an environment of asset price volatility and overall decline in returns, a capital reallocation around "safety" is taking place.

From over 3% to the '1% era', deposits bid farewell to high interest rates

In the second half of this year, Ms. Xu's deposit is about to expire. Three years ago, she deposited a three-year deposit at a city commercial bank with an interest rate of 3.20%. This was the higher deposit interest rate she could find at that time, as most banks offered three-year deposit rates below 3%. Recently, she consulted and learned that the minimum deposit interest rate for both three-year and five-year deposits is 1.80%.

This round of deposit interest rate decline began in 2022. In April 2022, the central bank guided the establishment of a self regulatory mechanism for market interest rate pricing and a market-oriented adjustment mechanism for deposit interest rates, further strengthening the linkage between bank deposit interest rates and market interest rates. Subsequently, as the central market interest rate continued to shift downwards, large banks proactively adjusted their deposit listing rates multiple times.

Taking the three-year deposit of China Construction Bank as an example, in September 2022, the listed interest rate for the bank's three-year deposit was 2.60%; By the end of 2023, it will decrease to 1.95%; In July 2024, it decreased to 1.75%, and further decreased to 1.50% in October of the same year; Reduce to 1.25% in May 2025. In less than three years, the three-year listing rate has cumulatively decreased by 135 basis points. The listing interest rate for five-year deposits has also decreased from 2.65% in 2022 to the current 1.30%.

In the past, the longer the term and the higher the interest rate, depositors could exchange liquidity for relatively considerable returns. But now, this logic is changing, with many banks' three-year and five-year deposit interest rates remaining the same, and even some banks experiencing interest rate inversion.

More noteworthy is that banks are actively reducing long-term high cost liabilities. Previously, existing deposits with interest rates of 3%, 4%, or even higher gradually matured, while the cost of absorbing new deposits continued to decrease. For banks, this is an important means to alleviate the pressure of net interest margin.

According to the first half of 2026 performance released by multiple banks, the average interest rate of Agricultural Bank of China's deposits was 1.13%, a year-on-year decrease of 29 basis points. The interest rate of personal fixed deposits decreased from 2.10% to 1.67%, a decrease of 43 basis points. The average interest rate for ICBC customer deposits has dropped to 1.15%, while the interest rate for personal time deposits has decreased from 2.04% to 1.69%.

How much did the 'deposit moving' move

2026 is a big year for the concentrated maturity of high interest fixed deposits. According to estimates released by multiple securities firms, the amount of medium and long-term deposits that will mature this year is approximately between 400000 and 60 trillion yuan.

When bank deposits can only provide a return of about 1%, where will this large amount of low-risk funds flow to? Securities firms, insurance companies, funds and other institutions are eagerly awaiting the "deposit relocation", which has become one of the variables worth paying attention to in the wealth management market.

However, the management of several banks mentioned at the 2026 mid-term performance meeting that the retention rate of deposits after maturity is relatively high, with most retention rates above 90%. Tang Shuo, Vice President of China Construction Bank, stated that from the first half of the year, the maturity fund acceptance rate of individual customers' fixed deposits at China Construction Bank has been very stable, with an acceptance rate of over 90%; Zhou Wanfu, Vice President of Bank of Communications, stated that the renewal rate of the bank's fixed deposits after maturity remains above 90%. The risk appetite of the fixed deposit customer group is generally stable, and even in the case of low interest rates, they still tend to keep their funds in banks, believing that this is a reassuring choice.

It can be seen that a portion of the funds will still remain in the deposit system. At the same time, among low-risk products, savings treasury bond, monetary funds, cash management products, low-risk bank financing, bond funds, and insurance products with savings attributes are all alternatives to deposits.

At the beginning of this year, after a deposit matured and last year's year-end bonus was received, Ms. Xu saw that the gold price had been rising all the way, so she invested this part of the funds in gold deposit. But due to unfamiliarity with the gold market and the recent sharp fluctuations in gold prices, this part of the investment is currently suffering a heavy loss. Faced with the soon to expire deposit, Ms. Xu's bank account manager recommended insurance products, but after considering it, she declined the suggestion and decided to proceed with the deposit.

Ms. Xu sighed that the era of relying on "risk-free high interest deposits" to obtain stable returns in the past is fading away. When three-year and five-year deposits were able to provide returns of around 3% or even higher, deposits were both a safe asset and an investment tool with certain wealth appreciation capabilities. When the deposit interest rate drops to around 1%, the wealth appreciation function of deposits is weakening, and their liquidity management and asset "ballast" functions are becoming more prominent.

For funds seeking a safe haven, the importance of returns is decreasing. Therefore, depositors like Ms. Xu are still looking for large denomination certificates of deposit, specialty fixed deposits, and even transferring funds between different banks for interest rate spreads of tens of basis points.

Where is the new foothold under the difficulty of finding safe assets

Deposit interest rates may continue to decline. According to the central bank report, the weighted average interest rate for household deposits at the end of March 2026 was 1.31%, with a weighted average interest rate for current deposits of 0.08% and a weighted average interest rate for new fixed deposits of 1.31%. At the end of June, the weighted average interest rate for current deposits was 0.08%, and the weighted average interest rate for newly issued fixed deposits was 1.28%.

However, some small and medium-sized banks have recently raised deposit interest rates against the trend. Starting from July this year, state-owned banks have successively resumed the issuance of 5-year large denomination certificates of deposit, with interest rates reaching up to 1.60%, which is 30 basis points higher than the listing interest rate of deposits during the same period. Huaxia Bank, Ping An Bank and other joint-stock banks, as well as local small and medium-sized banks such as Su Shang Bank and Changshu Bank, have gradually followed suit and launched relevant medium - and long-term limited deposit products, with corresponding interest rates ranging from 1.70% to 1.85%.

In September, WeBank raised the listing interest rate for three-year deposits from 1.60% to 1.75%. In addition, the interest rates of medium and long-term deposit products of some private banks have shown a phased rebound.

Wang Yifeng, Chief Analyst of Financial Industry at Everbright Securities, stated that the phenomenon of state-owned large banks restarting the issuance of 5-year large deposit certificates and local small and medium-sized banks raising deposit interest rates in stages indicates the need for banks to strengthen liability management in the context of market environment changes and deposit disintermediation. This is based on considerations of various factors such as interest payment costs, assessment indicators, and market change expectations.

After the maturity of several trillion yuan fixed deposits, some funds will choose to continue to be deposited, some will enter the bank for financial management, some will look for treasury bond and insurance, and some funds may gradually increase the allocation of equity assets. Funds are moving, but the need for hedging has not disappeared.

In the "1% era", finding a safe haven for funds is becoming a new proposition for residents' asset allocation.

(Author Hu Yanming)