Issuance of Net Value Wealth Management Products by Chinese Banks Rises 8-Fold in First Quarter after COVID-19 Outbreak

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The issuance of net-value wealth management products (WMP) by commercial banks in China has seen a surge in the first quarter of 2020.

Data from ChinaWealth.com.cn indicates that the first quarter of 2020 saw the issuance of 4037 net-value WMP’s by Chinese banks, for an increase of 834% compared to the same period last year during which only 432 were issued.

Chinese banks have rapidly shifted from principal-guaranteed WMP’s to net-value WMP’s ever since the launch of asset management rules at the start of 2018, which effectively removed any “implicit guarantees” on the instruments.

WMP’s have long served as a key means for smaller lenders in China with limited branch networks to better access funds by covertly providing higher returns to depositors.

In the first quarter China’s municipal lenders issued a total of 2035 net-value WMP’s, accounting for over 50% of the total.

Joint-stock banks issued 770 net-value WMP’s, or 19% of the total, while rural commercial banks issued 720, or 17.8%.

Big state-owned banks issued a total of 106 net-value WMP’s, or just 2.6% of the total for period, although the average scale of these instruments was far greater than that for regional or joint-stock lenders.

3599 of the net-value WMP’s issued in the first quartered were fixed income products, or over 90% of the total, while 316 were mixed WMP’s, or 7.8%, while 48 were equity products.

The wealth management subsidiaries of Chinese banks are also playing an increasing role on the WMP market, issuing a total of 793 WMP’s thus far, of which net-value WMP’s account for over 90%.

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