China should channel its high level of savings from banks to the stock market in order to avoid risks to the financial system and further develop the capital markets, Bloomberg reported on Dec 2, citing the central bank adviser Li Daokui.

Li's concerns about the nation's rising household deposits come as stock investors open fewer accounts to trade equities, even as inflation threatens to erode savings. The nation's benchmark stock index fell 5.3 percent last month, the first drop since June, on speculation the government will keep raising interest rates to tame inflation that surged to a two-year high.

"Investors are seeking to ensure gains or at least maintain the value of their money," said Shen Nan, a strategist at Changjiang Securities Co in Shanghai. "The negative deposit rate due to inflation and restricted property investment makes the stock market a significant channel for investors seeking capital returns."

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Consumer prices jumped 4.4 percent in October, the fastest in two years, and above the government's full-year target of 3 percent. The central bank on Oct 19 raised interest rates for the first time since 2007, with the benchmark one-year lending rate increasing by a quarter of a percentage point to 5.56 percent and the deposit rate by the same amount to 2.5 percent.

The nation's savings ratio stood at 54 percent of gross domestic product in 2008, the highest among major economies in the world, according to data compiled by the World Bank.  

"China's bank savings remain at very high level," Li said in an interview with the People's Daily. "There could be potential risks for the banks and the nation's whole financial system if there happens to be a large number of withdrawals suddenly."

Saving money

Household deposits increased 1.04 trillion yuan ($156 billion) in September, the biggest rise in seven months, to 29.9 trillion yuan. China's current household savings exceeded the combined gross domestic product of Brazil, India and Russia, according to Bloomberg data.

Even with last month's decline, the Shanghai Composite Index has rebounded 21 percent since reaching this year's low on July 5 on expectations central banks around the world will inject more cash into their economies to boost growth.

Investors opened 388,107 accounts during the week ended Nov 26, a drop from 436,396 accounts the previous week. Individual investors comprise 99 percent of the nation's 150 million trading accounts.