On August 25, the Shanghai Composite Index rose 1.51% to 3,883.56 points, marking a new high for the current market rally. During this breakthrough at the index level, A-share trading volume reached 3.18 trillion yuan for the day.

Driven by declining interest rates and a recovering capital market, Chinese household savings are experiencing a historic shift.

The latest financial statistics from the People's Bank of China show that RMB deposits increased by 500 billion yuan in July, with household deposits decreasing by 1.11 trillion yuan - a reduction of 780 billion yuan more than the same period last year. Meanwhile, deposits at non-bank financial institutions surged by 2.14 trillion yuan, an increase of 1.39 trillion yuan compared to the previous year.

Data from China Securities Depository and Clearing Corporation reveals that A-share new account openings reached 1.9636 million in July, up 70.5% year-on-year and 19.27% month-on-month. Brokerage client margin balances grew significantly, with margin financing balances returning above the 2 trillion yuan mark.

This contrasting trend has been vividly termed "deposit migration" by the market. This trillion-yuan-scale capital transfer presents both historic opportunities for optimizing household wealth allocation and new risks from financial market volatility.

**Widening Yield Gap Becomes Core Driver of Capital Migration**

"Currently, one-year term deposit rates have fallen to 0.95%, while bank wealth management products offer an average annual return of 2.12%. Combined with broad gains across major stock indices, this creates a significant yield differential," said Professor Tian Lihui, Dean of the Financial Development Research Institute at Nankai University. This interest rate differential driving household asset reallocation is the fundamental force behind "deposit migration."

Data shows that by July 2025, major commercial banks' one-year term deposit rates have generally fallen below 1%, with three-year term deposit rates dropping to around 1.25%. In contrast, bank wealth management products maintain stable average annual returns above 2%, with some equity-oriented wealth management products yielding over 5%.

According to China Wealth Management Network data, as of the end of June 2025, the bank wealth management market reached 30.67 trillion yuan in outstanding scale, firmly reestablishing the 30 trillion yuan threshold.

"This significant yield gap is driving large-scale capital flows from bank savings accounts to equity assets and wealth management products through channels like bank-securities transfers and fund subscriptions. Simultaneously, banking sector 'anti-involution' measures curbing high-rate deposit competition further diminish deposit attractiveness," Tian explained.

In July 2025, A-share markets experienced broad-based gains. The Shanghai Composite Index rose 3.74% for the month, the Shenzhen Component Index gained 5.20%, and the ChiNext Index performed particularly strongly with an 8.14% surge. Over 4,600 individual stocks across the market posted gains, creating obvious wealth effects.

"The A-share market's upward trajectory and stock market recovery significantly enhanced household risk appetite," added Liu Ying, a researcher at the Chongyang Institute for Financial Studies at Renmin University of China.

Liu noted that multiple factors combined to create July's phased differentiation in deposit structure, including: banks' reduced deposit-gathering momentum after mid-year assessments ended, leading to capital flowing back to wealth management; deposit rate cuts lowering risk-free returns while wealth management yield recovery and improved equity expectations enhanced substitution effects; and rising brokerage margins and client settlement funds driving "passive deposit increases" in the non-bank sector.

**Sustainability of "Deposit Migration" Trend**

Regarding the sustainability of the "deposit migration" trend, Tian believes non-bank deposit increases have strong short-term sustainability but require vigilance against market volatility and liquidity risks in the medium to long term. If economic recovery falls short of expectations or stock markets experience corrections, these funds could rapidly return to deposit accounts.

Liu points out this phenomenon exhibits clear cyclicality and conditional dependence. "If equity market wealth effects and money market fund yields continue, while bank liability costs keep declining, this capital transfer trend could persist for a period. However, once markets retreat or monetary easing marginally slows, funds may quickly flow back to the banking system," Liu said.

Liu specifically highlighted three potential risk pathways requiring attention. First is liquidity mismatch and procyclical volatility risk, where short-term capital's "quick in, quick out" characteristics could amplify redemption pressure and interbank market volatility. Second is market risk from leveraged trading, as rising margin financing balances and margin scales could create stampede effects during market declines, exacerbating volatility. Currently, two-market margin financing balances have exceeded 2 trillion yuan, growing approximately 20% since year-start. Third is sales and suitability risk, where recovering wealth management product yields might induce aggressive sales behavior by financial institutions, leading to risk mismatching and inappropriate sales practices. Some investors might overlook the matching between their risk tolerance and product risk levels.

Addressing potential risks, Liu recommends incorporating large volatile deposits at non-bank institutions into high-frequency monitoring systems, raising discount requirements for Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR), strengthening concentration management, and timely use of reserve requirement ratio cuts and Medium-term Lending Facility (MLF) tools to hedge seasonal volatility. Additionally, strengthening liquidity and duration management for money market funds and "fixed income+" products, implementing swing pricing and redemption gate mechanisms, and suppressing procyclical behavior through differentiated margin requirements and intraday risk control measures.

Tian supplemented that market-oriented interest rate mechanisms should be improved to narrow yield gaps between bank and non-bank products; registration-based reform should be deepened to stabilize market expectations and encourage medium- to long-term capital market entry; supervision should be strengthened to strictly control non-bank institution leverage operations and nesting risks, preventing cross-market risk contagion; and investor education should be optimized to enhance household risk awareness and avoid short-term speculative behavior distorting long-term asset allocation logic.

"Current capital flows reflect awakening household wealth management consciousness, but require balancing 'stable growth' with 'risk prevention,'" Tian stated. Policy should follow the trend while guiding funds from financial speculation toward real economy support to achieve a virtuous "wealth management + real economy" cycle.