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RETAIL BANKING | Tony Chua, China
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China's Big Four see huge outflows

Sources suspected that a large chunk of the $65.75bn deposits have flowed to the high-yielding private lending markets.

China's four biggest banks are seeing a big outflow of deposits, which have found their way to private lending markets, the state-run China Securities Journal reported Thursday, citing unnamed sources.

The report said in the first 15 days of September, outstanding deposits in the Big Four banks -- Industrial & Commercial Bank of China Ltd., China Construction Bank Corp., Bank of China Ltd. and Agricultural Bank of China Ltd. -- fell CNY420 billion ($65.75 billion) from the end of August.

The report cited analysts and banking sources as saying that a large portion of the CNY420 billion of deposits may have flowed to the high-yielding private lending markets, which have grown rapidly in recent months due to the strong borrowing demand from small businesses.

Chinese authorities have raised benchmark rates and taken other measures to tighten monetary conditions in a bid to rein in inflation, which reached 6.2% in August. One consequence of the tighter policy is that it's become more difficult for smaller businesses to get financing from banks, and they have turned increasingly to private lending sources.

Borrowing rates in the private lending markets are typically 10 times the benchmark deposit rates, the report said. China's one-year benchmark deposit rate stands at 3.5% now.

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