Moreover, according to PBoC data, only 20% of lending is done near benchmark rates, which are now at 5.6%. Consequently, this suggests that large state-owned banks, which only offer about 3% for one-year deposits, will likely experience the immediate benefits.
Banks could eventually extend more loans to private borrowers where they can demand higher rates. However, the large spreads between private and state-owned borrowers have persisted, suggesting banks will be slow to ditch the reliability of state-backed companies. Consequently, doing business with state-owned firms remains a common theme as safety trumps risk and potentially better returns for now.
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Max Chen contributed to this article.