Wealth Management Products Enjoy Boom Amongst Listed Concerns

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A key segment of China’s shadow banking sector is enjoying booming popularity amongst listed concerns as they strive to shore up incomes amidst easing economic growth.

The latest data from Chinese financial information provider Wind indicates that a total of 9,641 listed A-share corporations invested 887.2 billion yuan ($128.5 billion ) of funds into WMP’s over the past year ending Wednesday.

This volume of investment represents a 46% year-on-year increase compared to the year-long period ending 10 May 2016.

WMP’s are short-term financial instruments that have gained significantly in popularity over recent years due to the higher yields they provide compared to banks deposits, as well as the perception that they’re protected by implicit guarantees from lenders.

Listed concern now appear to be turning to them amidst a slowdown in real economic growth that is curbing their profits.

Six A-share corporations have invested in excess of 10 billion yuan in WMP’s, including Beijing Sanyuan Foods, Tianjin Tianhai Investment and Yanzhou Coal Mining.

The burgeoning popularity of WMP is no doubt exacerbating concerns amongst regulators amidst their ongoing crackdown on the financial sector, given that the instruments are considered a key part of China’s shadow banking sector.

A recent report by Moody’s notes that WMP’s are the fastest growing segment of the Chinese shadow banking sector, surging to 29.1 trillion yuan in the first quarter of this year.

Concerns about the contribution of WMP to shadow banking has already prompted the China Banking Regulatory Commission to flag a further crackdown on the instruments, as part of broader efforts to deleverage the Chinese economy.

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