China’s leading commercial banks have reduced their deposit rates for the second time this year, a strategic decision aimed at alleviating the strain on lenders’ profitability following the government’s reduction of mortgage and lending rates to stimulate economic growth.

Major financial institutions, including the Industrial & Commercial Bank of China and China Construction Bank Corp., have reduced the interest rates on one-, two-, three-, and five-year time deposits by 25 basis points, as indicated on their official websites.

In the morning session, ICBC shares experienced a decline of 0.5%, whereas CCB shares fell by 0.85%.

This follows a comprehensive economic stimulus initiative unveiled by Chinese authorities last month, featuring a series of easing measures such as reductions in benchmark interest rates and a lowering of reserve requirements for banks aimed at promoting lending activity.

Before the announcement on Friday, the governor of the central bank, Pan Gongsheng, indicated that a reduction of 20 to 25 basis points in deposit rates was forthcoming.

This action signifies the continuation of a trend in reducing deposit rates that commenced in late 2022. Chinese financial institutions reduced deposit rates on three occasions last year, with an additional cut occurring this July.

The principal state-owned banks in the nation are experiencing significant strain, as their profit margins are compressed by subdued credit demand, a lackluster economy, and a wave of aggressive monetary easing measures. Official data indicated that the sector’s net interest margins were recorded at 1.54% by the conclusion of the second quarter, maintaining the same level as the first quarter, yet reflecting a decline from 1.74% a year prior.

The People’s Bank of China has indicated its intention to continue implementing easing measures. Local media indicated on Friday that Pan announced a reduction of the seven-day reverse repo rate by 20 basis points.

Local media reports indicate that the loan prime rate, set to be announced on Monday, is anticipated to decrease by 20 to 25 basis points, according to statements from the PBOC governor.