Compared to two months ago, the total household savings of financial institutions experienced a fall of 2.5%, that is, a net decrease of 445.8 billion Yuan, which means that the long hungering high saving deposits showed a trend of significant decline.

Data provided by the central bank showed that household saving deposits are diminishing from RMB 17.545 trillion Yuan at the end of March to about 17.099 trillion Yuan at the end of May, a net decrease of 445.8 billion Yuan within two months.

Zhang Liqun, a researcher from the macroeconomic research department of the State Council Development Research Center, said that the current reduction of household savings sends out a new signal that the household savings and the stock market and other investment channels are gradually forming a link.

“As the household savings transferred to the stock market, bank deposits are reducing with it. With relatively inadequate development of capital markets and narrow investing channels, household savings deposits are more relative to the changes in the commodity market, in other words, more associated with consuming”, said he.

The Asian Development Bank economist Tang Min said, the reduction of savings to a certain extent is able to resolve the bank's huge financial pressure, broadening financial products markets such as bonds, funds, stocks and others and dispersing risks of the banks.

As a response to the reduction of household RMB saving deposits, Shanghai and Shenzhen stock markets have seen a rapid growth in new accounts. China Securities Depository and Clearing Corporation data shows 16.5614 million new accounts spring up in the Shanghai and Shenzhen stock markets from April to June 12, while the number is 5.1793 million in the whole year of 2006. People who were keen on savings deposits for a long time have a big change in their investment concepts.

Because the inflation rate is higher than the nominal deposit rates, resulting in a negative real deposit rate, the attractiveness of savings have been declining. Take the data of May as an example, financial institutions benchmark rate on one-year deposits was 3.06%, while consumer price index rose by 3.4% over the corresponding period, and the real interest rate was negatives. It also drives people to seek new investment channels actively.

According to Peng Xingyun, a scholar from Finance Institute of Chinese Academy of Social Sciences, residents take the initiative in the allocation of financial assets, which has changed the previous bank-based single financial investment structure into the pluralistic coexistence of banks, stocks, funds, insurance and others. It is conducive to the efficiency of the financial system.

The hungering high RMB scale in recent years has been described as "caged tiger." How to force the "tiger" to escape from the “cage” and to appropriately lower savings rate to stimulate domestic demand, is the focus of China’s sustainable and healthy economic development. So, is the reduction of savings now able to be transformed into the driving force of domestic demand?

Zhang Liqun thought that the present reduction of household savings will not influence much of the normal consumer demand. However, it will affect the family investment demand. Part of the investment will be shifted from the real estate to capital market, which will play an active role in stabilizing the real estate market.

Peng Xingyun believed that the sustained high prices in the stock market will lead to a higher expected future income, and the residents’ aspirations of accumulating wealth will become strong consequently. This will even inhibit in a short time the expansion of domestic demand. In the long run, this issue waits for further observation.

At present, savings interest tax has to be deducted from residents’ savings profit. Zhang Liqun held the point that the impact of interest tax and negative interest rates which have always existed is not directly related to the reduction of household savings this time. The major cause should be the extension of investment channels like stock market. The existence of interest tax is mainly related to the policy regulation of capital market under current circumstances.

However, Zhang also said that the fluctuation of the stock market will also affect the stability of household savings to a certain extend. Therefore, he said, whether the household savings will continue to reduce or not, is waiting for future observation.