Negative interest rates are on the way
This is definitely iconic
Historic moment
Just now, Ningbo Bank announced: Current account interest rate directly adjusted to 0%, one-year fixed deposit only 0.5%.
After worrying for so long, 0 interest rates are finally not just an “academic assumption”, but a reality!
No one can withstand balance sheet reduction.
According to data from the People’s Bank of China, in 2025, short-term loans to residents for daily consumption and individual business loans decreased by 835.1 billion yuan, indicating that the resident sector is relatively cautious about consumption and investment expectations for the economic environment.
This is the first time since 2007 when public data became available!
Last year, although medium and long-term loans to residents increased by 1.28 trillion yuan, the new increase was down 43.1% compared to 2024. In other words, too few people are buying houses.
An economics professor said that it is now a tale of two extremes, with the internal circulation system being very involutionary, and the external circulation deeply embedded in the global AI industrial chain developing rapidly.
But the problem is that AI is not friendly to everyone – 90% of people may own real estate, and 25% invest in the stock market. If the former falls and the latter rises, overall consumption power will decline.
Similarly, the AI field is developing rapidly, but its practitioners may account for less than 10% of the total population.
Facing the cold winter, everyone only saves and doesn’t spend. The only way to hedge is to reduce deposit profits, or even make them negative!
But in China, due to the constant pressure of inflation, deposits have been the direction that the government has always encouraged since the 1960s. Even to control spending, coupons were used to “castrate” the function of currency, making it impossible to spend.
Therefore, in the minds of the people, deposits are similar to buying government bonds, which is a form of financial trust that the people entrust to the government.
To break this rigid trust that has been formed for more than half a century, in addition to economic considerations, there is also the reconstruction of the relationship of trust.
It’s a very simple principle: is it feasible to allow Chinese people, especially the elderly, to hold a large number of stocks and other financial assets in addition to buying houses and deposits?
If not, 0 interest rates will be a psychological blow to them.
But this is coming sooner or later.
The net interest margin of commercial banks has fallen to 1.42%, a new low in 20 years, and the traditional “interest rate spread” model is being hollowed out.
Especially when the people and enterprises only deposit but do not borrow, it will only bring greater loss pressure to the banks.
The 0 interest rate that has now officially arrived has finally completed a key leap on a psychological level.
The next question is, if everyone continues to reduce their balance sheets, when will negative interest rates arrive?
In the short term, the probability of nominal negative interest rates may not be high.
After all, 0 interest rates have just arrived, and residents still have a process of adaptation, and the social acceptance of negative interest rates is even lower. Banks represent the state and cannot take depositors’ money and still pay interest, which is too bullying.
More importantly, if negative interest rates are used to “drive out” a large amount of cash from banks, and the people neither buy houses nor speculate in stocks, where will the funds go? If financial disintermediation occurs, and the people directly use cash transactions, then money laundering, anti-fraud, and other matters will be completely out of control.
Or, the people simply exchange for US dollars or rubles, especially rubles, which currently have a deposit interest rate of 15.1%. What if “de-renminbi” occurs?
In short, currency must have assets as an “anchor” to avoid derailing.
But if the time is extended, the answer becomes ambiguous.
I feel that negative interest rates are already on the way.
Some people even say that when the current account interest rate is already 0%, “negative interest rates” have actually occurred at a substantive level – as long as the price increase is positive, currency depreciation is occurring, and 0 interest rates are negative interest rates.
0 interest rates are ending the era of Chinese banks relying on the interest rate spread between deposits and loans for decades, that is, the “pawnshop” model proposed by Jack Ma in his trouble-making speech in Lujiazui.
At the same time, it will also reconstruct the relationship between the people and the banks representing the state.
Bigger storms may not have been seen by everyone, but they will definitely happen.
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