A survey on Shanghai residents' third-quarter savings trends
conducted by the Shanghai Branch of the People's Bank of China (PBOC) reveals growing
eagerness for an interest rate increase.
Some 93.3 percent of respondents believe the current interest
rate is low, a jump of 10.3 percentage points from the third
quarter of 2003. Just 6.5 percent feel the rate is moderate, down
10.2 percentage points from the same period last year.
Low-income respondents are less satisfied than their
higher-income counterparts with the current rate. Savings deposits
make up the bulk of financial assets of low-income investors, while
those in higher income brackets have more diversified investments.
An increase in the interest rate may lead to a decrease in the rate
of return from other forms of assets for high-income residents.
Stock market sluggishness has dampened enthusiasm for investment
in securities. The willingness index of survey respondents to
invest in treasury bonds, bonds, stocks and funds is only 36
percent, five percentage points lower than in the previous quarter.
Investment in stocks and funds makes up only 10 percent of total
investment portfolios, 13 percentage points lower than in the
second quarter.
Despite their low returns, low-risk savings products are making
gains in popularity: treasury bonds were the investment of choice
for 22.8 percent of those surveyed. Of the financial assets
currently owned by respondents, treasury bonds account for 16.5
percent, up 2.7 percentage points from the previous quarter.
With the investment market remaining in the doldrums, people
would rather spend than save. Rising consumer prices and incomes
provide additional impetus.
Consumer prices are at their highest point in two years, and
public satisfaction with prices has been sliding all year, with
18.8 percent of residents to the third-quarter survey saying they
are far too high.
Rumors of a possible interest rate hike have been circulating
for some time. A report in the September 9 edition of the
Securities Times says that a number of analysts believe that
a recent speech by PBOC Governor Zhou Xiaochuan, together with the
unusually high rate assigned to a recently issued T-bond and
commercial banks' response to that, are strong signs of an
impending increase in the rate.
(China.org.cn by Yuan Fang, September 10, 2004)