Summary of Key Points
The trend of residents shifting their deposits to financial products continues, with institutions predicting an increase in the scale of financial management by 2 trillion yuan in the second half of the year. The market for financial products is becoming increasingly concentrated, with leading firms taking a dominant position. Due to the ongoing decline in interest rates, returns on financial products are under pressure, prompting bank subsidiaries to increase their investment in equities (such as participating in IPOs and investing in high-tech companies) to overcome this challenge.
1. The Trend of Deposits Moving to Financial Products Continues: An Expected Increase of 2 Trillion Yuan in the Second Half of the Year
Residents are becoming less inclined to keep their money in bank deposits. In April and May 2026, household deposits decreased for two consecutive months, totaling a reduction of 2.05 trillion yuan (the first time in nearly a decade), while deposits with non-bank financial institutions such as those offering financial products and funds increased by 3.61 trillion yuan, indicating a shift in funding towards these products.
Although the growth rate of financial product assets in the first quarter of 2026 (9.51%) was slower than the annual rate of 2025 (11.15%), this was mainly due to seasonal factors, such as funds temporarily being reclassified as bank deposits at the end of the quarter. The growth of financial product assets in the second quarter was 1.8 trillion yuan, nearly 800 billion yuan more than in the same period last year. Institutions are generally optimistic about the second half of the year; CITIC Construction Investment expects an increase of 2-3 trillion yuan in financial product assets, and China Merchants Securities suggests that the monthly increase in July could exceed 1.7 trillion yuan, with annual growth expected to surpass 2 trillion yuan for the entire second half of the year.
Additionally, the number of investors in financial products is on the rise—148 million in the first quarter, a year-on-year increase of 17%. New products were also very popular, with 825 new products launched in just one week from July 5 to 11, totaling 275.7 billion yuan.
2. Increasing Concentration in the Financial Products Market: Smaller Institutions Gradually Fading Away
The financial products industry is undergoing a reshuffle: In the first quarter of 2026, fewer institutions issued new financial products compared to 2025 (30 fewer bank institutions and only 1 more financial management company); the number of existing financial product issuers decreased from 246 in 2025 to 188, a reduction of 58.
Leading firms are becoming stronger: Among the 32 financial subsidiaries, China Merchants Bank Financial Management has the largest assets (2.46 trillion yuan), followed by China Construction Bank, Industrial and Commercial Bank of China, and Bank of Communications, all with assets exceeding 2 trillion yuan. Smaller institutions either lack the capability to issue new products or see their existing asset sizes shrink, leading to their gradual elimination and increasing market concentration.
3. Earnings Becoming More Difficult to Achieve: Interest Rate Drops Force Financial Companies to Transform
Returns on financial products are declining. In the first quarter of 2026, financial products generated 161.9 billion yuan in profits for investors, a decrease of more than 20% compared to the same period last year. This is due to lower market interest rates—cash management products offered in June had an annualized yield of only 1.15%, and short-term pure fixed-income products even fell to 1.09%. Returns on “fixed-income+” products also generally decreased. In contrast, equity-related products (stock-based) have higher yields: as of the end of June, equity products yielded 5.01%, while mixed products yielded 3.32%, significantly higher than the 2.23% for fixed-income products. Given the strong performance of the stock market this year (the CSI 500 index rose by 21%), financial companies are forced to shift towards equity investments to retain customers.
4. Institutions Seek New Approaches to Increase Returns: Investing in High-Tech for Future Growth
To boost returns, financial companies are adopting new strategies:
1. Participating in IPOs: Multiple financial subsidiaries (such as China Construction Bank, Ningbo Bank, and Everbright Financial Management) have participated in IPO offerings, with significant gains—one product from Ningbo Bank Financial Management increased its return by 1.56% through IPO participation in just three quarters. Institutions predict that IPO participation will become more common in the second half of the year, and specialized products for this purpose may be introduced.
2. Investing in High-Tech Companies: Financial companies are directly investing in unlisted high-tech firms, hoping to profit from their potential growth after IPOs. For example, Hangzhou Bank Financial Management invested in Yunbao Intelligence (a domestic DPU chip company), which has applied for an IPO on the GEM board, and Xingyuan Technology (an AI chip company) has passed the review process for the STAR Market. These moves represent financial companies' transition from focusing on fixed-income returns to seeking growth-oriented returns.
In summary, the shift of household deposits to financial products is a major trend. Financial companies are relying on both expanded market share and equity investments to overcome challenges. The financial products market will become more concentrated, with a focus on high-growth sectors. However, ordinary investors should be aware that equity-based financial products carry higher risks than fixed-income ones and should choose products based on their risk tolerance.