What does resident savings transfer mean?

The so-called transfer of residents’ savings refers to the phenomenon in which residents’ surplus money is transferred between banks and stocks and bonds in order to choose better returns. However, bank interest is actually less than the national growth value and shows negative growth. The reason for the transfer of savings is the pursuit of profits by funds. When investors transfer funds from deposit accounts, it indicates that there is a profitable investment area. In the current investment environment in China, the stock market can attract funds the fastest, and the inflow of funds will push up the stock market. Just like the feast of 2007, stock market enthusiasm and savings funds danced together, and the Shanghai Composite Index hit a record high. Historical data also shows that every time savings move, the market is bullish that month.

As one of the important sources of funds for the A-share market, the process of “savings relocation” is crucial to market performance. Against the background of enhanced inflation expectations and high real estate prices, we have reason to believe that "savings relocation" is expected to inject more liquidity into the stock market next year.

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1. The conversion of residents’ savings into investment refers to residents’ spontaneous conversion of savings-type financial assets (such as bank time deposits, etc.) into investment. According to a report released by the central bank, the balance of household deposits in my country in 2019 was 82.14 trillion. If part of these savings are transferred to investment, it will have a great promotion effect on the capital market and will also be of great benefit to the development of the production side.

2. Directing huge residents’ savings to the capital market is currently a recognized economic management policy and the direction of efforts of all parties. Regulatory agencies have even regarded “promoting the transformation of residents’ savings into investment” as next year’s goal focus of work. The main reason is that the savings rate of Chinese residents is too high. Savings deposits are actually liabilities of banks. Banks then invest these deposits in the real economy in the form of creating assets. In this process, there is a problem of multiple currency creation. The bank's assets will expand exponentially, and residents' savings deposits will also expand exponentially, reflected in the continued expansion of M2. This is the biggest hidden worry in China's economy, causing the macro-leverage ratio to continue to remain low.