Continuous corrections in the Chinese stock markets in June slowed the pace of money flowing out of banks and into the markets, according to latest statistics from the Shanghai headquarters of the central bank.

In June, movement into the stock markets slowed for the first time in five months. Domestic financial institutions in Shanghai had received new deposits of 6.09 billion yuan (US$801 million) in June. This figure was still up 5.07 billion yuanyear-on-year, according to the statistics.
 
Enterprise renminbi deposits in Chinese financial institutions in Shanghai increased 76.93 billion yuan during the first half of the year, 28.25 billion yuan more than the increase during the same period of last year. The increase in fixed enterprise deposits was only up 2.21 billion yuan from a year ago, while that in current enterprise and household deposits rose by 26.04 billion yuan and 2.5 billion yuan respectively.

A rise in current deposits indicates enterprise success and efficient capital circulation, the Shanghai headquarters noted. Enterprises and citizens were also active in stock trading and investing in the real estate market in the first half of 2007, contributing to higher current deposit rates.

Enterprise deposits in domestic financial institutions in Shanghai increased 66.12 billion in June, of which 94.3 percent were current deposits, up 120.52 billion yuan from the previous month.

Banks are preparing for significant fluctuation in deposit levels.

Fluctuation will put commercial banks under pressure and raise the price of capital, said Lian Ping, chief economist at the Bank of Communications. Large banks will have to prepare more excess reserves, reducing benefits to fund management. Small banks will be alert to the upper limit of the deposit-loan ratio with unstable capital sources.

(China Daily July 10 2007)