Guosen: Residents' deposits continue to flow towards non-bank financial institutions, with insurance being an important direction for attracting funds.

Guosen released a research report stating that, overall, the flow of residents' deposits is not concentrated in a few products, but shows a trend of diversification, with insurance becoming an important direction for fund absorption. Equity-oriented mixed funds, fixed income+, QDII, FOF, commodity funds, etc. have also received some funds, while wealth management and money market funds have maintained their scale due to declining yields, reflecting investors seeking higher stable returns in a low-interest rate environment, while also pursuing a comprehensive strategy of diversification and globalization. Guosen's main points are as follows: In the first quarter of 2026, the operation of funds in the real sector showed three characteristics: strong fiscal support, weak endogenous momentum, and accelerated financialization of funds. Businesses and residents collectively received about 14.50 trillion yuan in funds, with bank loans (including write-offs and ABS) totaling about 9.20 trillion yuan, net financing of corporate bonds at 1.05 trillion yuan, fiscal net expenditure investment of about 3.06 trillion yuan (estimated value), net forex settlement of 1.25 trillion yuan, with significant contributions from fiscal and net forex settlement. In terms of fund allocation, resident deposits increased by 7.70 trillion yuan, non-financial corporate deposits by 2.54 trillion yuan, net increase in cash (M0) by 0.58 trillion yuan, net increase in financial investments (marginal item) by about 3.68 trillion yuan, with the proportion of financial investments at a high level in recent years. Characteristics of the behavior of entities: defensive savings by residents and policy reliance by enterprises continue (1) The resident sector shows clear deleveraging and defensive savings characteristics. In the first quarter, residents only increased their new financing by 296.7 billion yuan, reaching a multi-year low, with a reduction of 164 billion yuan in short-term consumption loans. At the same time, resident deposits increased by about 7.70 trillion yuan, reflecting a tendency towards precautionary savings in the face of unstable income expectations. (2) Despite some improvement in corporate sector financing, the structure demonstrates a policy-driven strength over market-driven spontaneity. Non-state-owned fixed asset investments continued to decrease year-on-year, and the PMI for small and medium-sized enterprises remained below the threshold. Investment growth was mainly concentrated in policy-supported areas, such as a 8.9% year-on-year increase in infrastructure investment, relatively good growth in high-end manufacturing sectors like general equipment manufacturing, while real estate investment fell by 11.2% year-on-year. Resident deposits are shifting in large scale from bank balance sheets to the non-bank system, with non-bank deposits increasing by about 2.3 trillion yuan in the first quarter, reaching historical highs. In terms of allocation, insurance products have become an important destination for absorption, with premium income in January-February reaching multi-year highs; equity-oriented mixed funds, QDII, FOF and other funds have also seen growth in their share. In comparison, wealth management and money market fund sizes have remained stable, indicating that investors are seeking diversification and globalized asset allocation in a low-interest rate environment. However, funds are circulating frequently within the financial system and have not effectively flowed down to the real economy, thus pushing up the valuation of financial assets without fully serving the real economy. Operation of funds in the real sector in the first quarter of 2026: Fiscal support remains unchanged, funds accelerate financialization The sources and flows of funds in the real sector in January-March 2026 are as follows: businesses and residents collectively received about 14.50 trillion yuan in funds, with bank loans (including write-offs and ABS) totaling about 9.20 trillion yuan, net financing of corporate bonds at 1.05 trillion yuan, fiscal net expenditure investment of about 3.06 trillion yuan (estimated value), and net forex settlement of 1.25 trillion yuan. In terms of fund allocation, resident deposits increased by 7.70 trillion yuan, non-financial corporate deposits by 2.54 trillion yuan, net increase in cash (M0) by 0.58 trillion yuan, and net increase in financial investments (marginal item) by about 3.68 trillion yuan. On the sources side, the proportion of loans has decreased, while the contributions from fiscal net expenditure and net forex settlement have increased significantly. (1) Net loans in the real sector increased by 9.20 trillion yuan, reaching a multi-year low and accounting for 63.4% of the total financing in the real sector, showing a clear downward trend in recent years. This is related to the smoother distribution of bank credit this year, indicating that the willingness of entities to finance is still not strong. Structurally, businesses are the main recipients of credit financing, while residents' financing willingness remains very weak. (2) The scale and proportion of fiscal net expenditure remain at high levels in recent years, supporting the economy strongly, as reflected in the 5.0% GDP growth in the first quarter, although the growth rate of social consumption remains at a low level. (3) The scale of net forex settlement continues to increase, becoming an important source of funds for enterprises in 2026, mainly related to changes in exchange rates rather than investment and expansion demands. On the fund allocation side, the proportion of resident deposits has significantly decreased, while financial investments have increased substantially. (1) Both the absolute level and proportion of resident deposits are at multi-year lows, with signs of outflows after high-interest deposits mature; and as enterprises receive financing, they may not significantly increase investment and expansion but rather increase financial investments, diverting funds that might have gone to residents. However, the addition of 7.7 trillion yuan in resident deposits indicates that the demand for precautionary savings among residents remains strong. (2) Corporate deposits are at a good level, with a significant contribution to the increase in net forex settlement. (3) The proportion of financial investments has significantly increased, indicating that after receiving funds, the willingness of enterprises and residents to consume and invest has declined compared to previous years, while the willingness to invest in financial products has increased. The deleveraging and high savings of resident sectors continue In the first quarter, resident new financing reached a multi-year low of 296.7 billion yuan, with short-term consumption loans decreasing by 164 billion yuan, indicating that residents are not only unwilling to increase borrowing, but are actively paying off debts, entering a deleveraging cycle. Additionally, the regulatory crackdown on high-interest personal consumption loans has accelerated this process. At the same time, residents have converted funds that could have been used for consumption or investment into precautionary savings. Against the backdrop of a large amount of high-interest deposits maturing and a slowdown in income growth for residents, resident deposits increased by about 7.7 trillion yuan in the first quarter, reflecting residents' tendency of "not daring to spend or borrow." Corporate financing reflects a feature where policy-driven measures are stronger than market-driven, and structural optimization is better than total expansion. In the first quarter, corporate long-term loans increased slightly year-on-year, but considering bond financing and the scale of net forex settlement, the total corporate financing in the first quarter was at a high level. However, non-state-owned fixed asset investments continued to decrease year-on-year, with SME PMI remaining below the threshold. Combined with high levels of fiscal net expenditure, this indicates that the improvement in corporate financing is mainly in policy-supported areas. Infrastructure investment in the first quarter increased by 8.9% year-on-year, real estate investment decreased by 11.2%, manufacturing investment increased by 4.1%, particularly in sectors like general equipment manufacturing where government support boosted growth. Overall, the key contradiction in the current macroeconomy lies in the decline in the growth rate of disposable income for residents and high uncertainty in expectations, leading to continued active deleveraging and defensive savings by residents, which from the demand side constraints the sustainability of expanding investment by enterprises. Therefore, it is emphasized that the comprehensive recovery of endogenous momentum in the economy still depends on fundamental improvements in the expectations of residents' balance sheets and substantial recovery in final consumer demand. Analysis of the flow of resident deposits In the first quarter of 2026, non-bank deposits increased by approximately 2.3 trillion yuan, reaching historical highs, which coincides with the minimal increase in resident deposits and the increase in financial investments during the same period, clearly confirming the trend of residents transferring funds from bank balance sheets to the non-bank system after a significant reduction in deposit interest rates. However, as previously mentioned, non-bank financial institutions are also facing a severe asset crunch, leading them to re-deposit the funds they absorb back into the banking system, ultimately resulting in high-frequency circulation between asset management products and interbank deposits. As funds have not truly flowed through consumption or investment channels to the real sector, they have only boosted financial asset valuations without fully serving the real economy, further exacerbating bottlenecks in monetary policy transmission. Where do resident deposits flow into asset management products? Lacking accurate data, one can only glimpse through changes in the scale of asset management products. (1) Insurance products, due to their relative rate advantages over deposits and promotion through bank channels, are expected to be important destinations for fund absorption. Insurance companies' new premium income in January-February 2026 reached around 1.64 trillion yuan, at multi-year highs. (2) There have been minimal changes in the scale of wealth management and money market funds, indicating insufficient attractiveness after the decline in yields. (3) In terms of public fund shares, equity-oriented mixed funds, mixed bond secondary funds, QDII funds, FOF funds, and commodity funds have all seen good growth in their shares, related to the overall good performance of commodity and equity markets in the first quarter. Risk warnings Growth may fall short of expectations, increasing pressure on banks' asset quality. Policies released in the future may not be favorable to the short-term fundamentals of banks. International political unrest and increased uncertainty overseas require vigilance against the impact on risk preferences due to changes in overseas situations.