rmb File photo:VCG

The interest rates for fixed- and current-term deposits held by the seven largest commercial banks in China were reduced on Thursday, effective immediately, the banks said in announcements.

Tian Yun, a veteran economist, told the Global Times on Thursday that trimming deposit interest rates may help boost consumer spending and investment in China, which will accelerate economic growth.

Rates for fixed-term deposits with durations of three months, six months, one year, two years and five years were all cut by 10 basis points (bps), effective on Thursday.

The rate for the three-year fixed term deposit was reduced by 15 bps to 2.6 percent, the newly released deposit interest rates by the seven commercial banks showed.

The banks are the Industrial and Commercial Bank of China, the China Construction Bank, Agricultural Bank of China, the Bank of China, the Bank of Communications, the Postal Saving Bank of China, and the China Merchants Bank.

"The banks work as market intermediaries, and when they change deposit interest rates, it's usually a reaction to market demand," said Tian, noting that deposit interest rates could be raised if market demand for cash rises.

The People's Bank of China, the country's central bank, on August 22 released the latest adjustment for the benchmark loan prime rate (LPR), lowering the one-year LPR by 5 bps to 3.65 percent and the five-year LPR by 15 bps to 4.3 percent.

The housing loan interest rate for first-time homebuyers in cities including Beijing, Shanghai and Guangzhou in South China's Guangdong Province has fallen below 5 percent, the Shanghai Securities News reported. 

"Lower demand for funds will lead to a decline in money supply, and the adjustment of the deposit interest rates will increase efficiency of capital flows, amid the current economic downward pressure," said Tian.

Global Times