Recently, tensions have resurfaced in the Sino-U.S. tariff dispute, leading to increased market concerns regarding external demand uncertainties. In response, several institutions believe that monetary easing in the fourth quarter may exceed expectations. With policy interest rates continually declining, it seems inevitable that the yields of currency funds will collectively fall below 1%, although there is still potential for expansion.
On October 17, a research report from Galaxy Securities indicated that fourth-quarter monetary easing could surpass expectations. This is attributed to the potential impact of increased U.S. tariffs on Chinese exports, alongside ongoing challenges related to low domestic prices and the necessity of reducing high real interest rates.
The fixed income team at Cinda Securities recently published a report stating that the current transition from old to new economic drivers represents a long economic cycle, during which macro leverage needs to be reduced, and risks for small and medium-sized financial institutions must be alleviated. Therefore, monetary policy needs to continue its support, and any central bank loosening will only be delayed rather than absent.
Cinda Securities also noted that as the interest rate center lowers, currency fund yields in China have entered the “1%” era. Given the current weak fundamentals, the yields of currency funds might continue to adjust, and a widespread fall below 1% is merely a matter of time. Nevertheless, whether for individual residential clients or institutional investors, currency funds remain crucial tools for liquidity management. On one hand, there is an increasing demand for liquidity from residents in a context of persistently declining broad interest rates. For institutions, currency funds offer high flexibility and stability. International experience suggests that the scale of currency funds does not necessarily correlate directly with yield levels.
Cinda Securities believes that independently of the current challenges, China's currency funds retain significant long-term development potential and space. As China's wealth management market continues to develop, there are limited options available for ordinary investors seeking low volatility and good liquidity investment products. Due to their unique product characteristics, currency funds are becoming potential beneficiaries under policy guidance and hold considerable appeal for low-risk investors. Given the dual drivers of policy support and market demand, currency funds are expected to continue benefiting. Additionally, the integration of online payment scenarios enhances platform competitiveness, establishing an ecosystem of “active liquidity” and “payment equals wealth management.”
Indeed, despite the ongoing decline in yields, the scale of currency funds has been growing against the trend. Data from the Asset Management Association of China shows that as of August 31, 2025, the total size of currency funds amounted to 14.81 trillion yuan, an increase of approximately 580 billion yuan since the end of June and about 1.2 trillion yuan since the beginning of the year. This data indicates that currency funds, as tools for managing idle funds, still possess considerable vitality and are likely to play essential roles in the wealth management systems of ordinary investors in the future.
Risk Warning: Investing in currency market funds does not equate to depositing funds in banks or deposit financial institutions; fund managers do not guarantee profitability or minimum returns.
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