The Chinese central government is about to launch new asset management regulations which will focus on the removal of risk-creating implicit guarantees.
The 2017 Q4 Monetary Policy Execution Report recently released by the Chinese central bank said that the draft version of new asset management regulations has been submitted to the State Council for approval.
According to Chinese analysts the submission of the draft version of the regulations to the State Council is essentially a green light for their approval, and they are likely to be implemented in the very near future.
The unveiling of the draft version of the new asset management regulations in November last year caused much controversy in Chinese financial circles, due to concerns that they could exacerbate risk by imperilling smaller lenders who depend upon wealth management products to fund their operations.
According to some reports these concerns prompted Chinese banks to convene a meeting with the People’s Bank of China, and call for the asset management curbs to be watered down.
Zhao Xijun (赵锡军), vice-head of the School of Economics & Finance at Renmin University, said to Securities Daily that any hopes for a loosening of the new rules were misplaced, as they were motivated by the practice of “regulatory arbitrage” by financial institutions.
Zhao said that even if the regulations are subject to amendment, they will still maintain a focus on “restricting irregular (investments), destroying implicit payments and removing multi-tier nesting (of investments) and channels.”
Pan Xiangdong (潘向东), chief economist with New Era Securities, said that the new regulations would serve to gradually staunch the illicit flow of funds into equities, yet their impact on the market would be “controllable.”