Tsinghua University Report Calls for China to Extend Transitional Period for New Asset Management Rules until 2022

A new report from the Chinese central bank’s finance school has called for an extension of the transitional period for key asset management rules designed to curb the excesses of the shadow banking sector.

The “China Asset Management Operation Regulatory Research Report” (中国资产管理业务监管研究) proposes extending the transitional period for the “Guid­ance Opin­ions Con­cern­ing Stan­dard­i­s­a­tion of As­set Man­age­ment Op­er­a­tions by Fi­nan­cial In­sti­tu­tions” (关于规范金融机构资产管理业务的指导意见) released in 2018 by two years until the end of 2022.

The Report also calls for implementation of the Guidance Opinions to focus more on putting pressure on bank wealth management products, while leaving specific handling of complex products to be independently determined by the banks themselves.

The Tsinghua University PBC School of Finance (清华大学五道口金融学院) and the China Wealth Management 50 Forum jointly released the report on 8 July 2020 in Beijing.

China launched the Guidance Opinions at the end of April 2018, as part of efforts to contain the burgeoning growth of the country’s shadow banking sector, while also setting a “transitional period” of two years for the rules.

PBOC hoped that the new rules would curb risk in the as­set man­age­ment sec­tor by re­mov­ing the “im­plicit guar­an­tees” that many prod­ucts were per­ceived to en­joy, as well as con­tain­ing the is­suance of wealth man­age­ment prod­ucts that com­prise a size­able chunk of the shadow bank­ing sec­tor.

Shang Fulin (尚福林), chair of the Economics Committee of the Chinese People’s Political Consultative Conference (PCC), said that in recent years regulators had made the asset management sector a key sphere for the prevention and dissolution of financial risk, strengthening regulatory systems as well as efforts to rectify shadow banking and cross-financial sector malfeasance.

Shang said that since 2017 regulators had squeezed out approximately 16 trillion yuan (approx. USD$2.29 trillion) in cross-financial sector high-risk assets, while trust sector interbank financing channel operations had fallen by nearly 5 trillion yuan from their historic peak.

The structural distribution of bank WMP’s has also undergone major changes, with net-value WMP’s seeing their share of the total rise from 15% prior to the launch of the Guidance Opinions to around 50% at present.

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