Title: The Chinese banking sector's structured deposits: growth, role in interest rate pass-through, and implications

Authors: Kerry Liu

Addresses: The China Studies Centre, University of Sydney, Sydney, 2000, Australia

Abstract: The Chinese banking sector's structured deposits have experienced rapid growth recently, especially after 2017. As a result of this, the Chinese regulatory authorities began to strengthen regulation in October 2019. Based on monthly datasets between January 2016 and April 2020 and a robust least squared model, this study finds that the growth of structured deposits is significantly associated with the growth of the real economy and the expansionary monetary policy. Based on a series of tests using quarterly panel data, yearly panel data, and quarterly time series data, this study finds that structured deposits play a significant positive role in interest rate pass-through from policy rates to the lending rates of commercial banks. This study also discusses the implications of structured deposits and the recent regulations for the Chinese banking sector. This study is the first of its kind in the academic literature and makes original and significant contributions to academia and policy-makers.

Keywords: structured deposit; industrial value-added; reserve requirement ratio; interest rate pass-through; interest rate liberalisation.

DOI: 10.1504/IJMEF.2022.124959

International Journal of Monetary Economics and Finance, 2022 Vol.15 No.2, pp.154 - 172

Received: 30 Oct 2020
Accepted: 14 Jan 2022
Published online: 18 Aug 2022 *

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