CHINA / Chinadaily.com.cn Exclusive
Stocks, funds top option for financial assets
By Dong Zhixin (chinadaily.com.cn)
Updated: 2007-06-21 10:39
Stocks and investment funds have replaced bank deposits as Chinese
residents' top option for financial assets, a central bank survey finds.
According to the questionnaire released on Wednesday, 40 percent of the
polled citizens thought it is most worthwhile to buy stocks and
investment funds, an increase of 10 percentage points from the first
quarter of this year.
That marked the first time in history that deposits dropped from the top
spot in attractiveness. Only 26.3 percent of those surveyed said they
opted to put more money into bank savings, the lowest level in six years.
In the second quarter of this year, 52.3 percent of Chinese residents'
financial holdings are in bank deposits, down from 66.5 percent a year
earlier.
Chinese household deposits decreased 278.4 billion yuan in May, the
biggest monthly drop ever, following a 167.4 billion yuan drop in the
previous month, according to central bank statistics released earlier
this month.
The survey also found a decline in the residents' desire for consumption,
with only 28.2 percent, an all-time low, of those polled saying they will
consume more.
The drop in consumption, in contrast with a steady pickup in enthusiasm
in stock and fund investment, indicated some residents are delaying
consumption to use the money for investment, the central bank said when
releasing the result of the survey.
China's stock market has soared more than 50 percent so far this year,
even after a nine percent tumble in late February and an 8.3 percent drop
in early June.
Analysts also attributed the decrease in deposits to the relatively low
interest rate. The benchmark one-year deposits carry an interest rate of
3.06 percent, while the consumer price index, a barometer of inflation,
hit 3.4 percent in May, the highest in more than two years.
In addition, interest income accrued from bank deposits is subject to a
20 percent tax, making the real interest rate at negative one percent,
which means depositors will face a decrease of purchasing power.
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