Further drop in domestic demand weighs on China markets

Research evidence excerpt

Further drop in domestic demand weighs on China markets

se by CNY3.6t in April and May, prompting speculation

that household deposits were flowing into the stock market. In the PBoC’s survey of

Chinese depositors’ consumption and investment plans, the number of respondents

replying that they plan to increase investment hit the highest level in two and a half

years in September 2025. However, while the number of respondents saying they

would increase savings fell slightly, it nonetheless remained at a very high level, which

suggests that people are not drawing down savings and reallocating funds to

investments. In fact, the December 2025 survey showed a decline in investment

appetite and a recovery in consumption appetite. In its 4Q 2025 monetary policy

implementation report, the PBoC explained the “relocation of deposits” in a column

on monitoring liquidity from the dual perspectives of financial products and bank

deposits. It explained that with asset management among companies and households

shifting from bank deposits to purchasing of wealth management products (WMPs)

and publicly offered investment trusts amid a decline in deposit interest rates, banks

have seen rapid growth in total assets for publicly offered investment trusts and WMPs

since spring 2025, but because 80% of these products (as of end-2025) are managed

in the fixed-income market, funds ultimately return to the banking system. So far in

2026, While retail investors’ new securities trading accounts by the end of May had

increased 58% compared with the same period in 2025, insurance returns have been

improving in recent years. And life insurance income has been rising steadily, which

points to an increase in new policyholders.

Further drop in domestic demand weighs on China markets 2