Big Banks Withdraw from Wealth Management Products

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A new report on China’s wealth management products indicates that the big state-owned lenders have dialled down their activity in this key segment of the shadow banking sector.

The “2016 China Banking Sector WMP Market Annual Report” released by China’s Banking Wealth Management Product Registration & Depository Centre on 19 May indicates that the big state-owned lenders currently account for roughly 30% of WMP’s, with joint-stock commercial banks accounting for 40%.

The report indicates that WMP growth is falling sharply as regulators step up their scrutiny of the shadow banking sector. The 2016 bank WMP growth rate fell by half compared to 2015, while market observers expect expansion to continue to flag in the current year.

Outstanding bank WMP’s were worth 29.05 trillion yuan as of the end of 2016, for a year-on-year rise of 23.62%, which is less than half the 2015 growth rate of 56.46%.

A decline in bank WMP’s could have adverse impacts on China’s bond market, given that the shadow banking instruments are increasingly used to invest in fixed income assets.

While bond investments comprise previously comprised less than a third of bank WMP funds, this figure had risen to 43.76% by the end of 2016.

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