The issuance of bank wealth management products (WMP’s) in China has plunged since the start of 2020, with returns on the instruments kept low by the efforts of the Chinese central bank to keep liquidity ample afloat post-COVID-19.
Data from Wind indicates that China has seen the issuance of 40,488 bank WMP’s since the start of 2020, for a decline of 47.3% compared to the 76,887 WMP’s issued in 2019.
In August alone only 1,845 bank WMP’s were issued, for the lowest one-month issuance volume in a decade.
According to members of industry returns on bank WMP’s have languished since this start of 2020, and been especially low since the beginning of August.
Liu Yinping (刘银平), analyst with Rong360’s Big Data Research Institute, said to state media that in the wake of a recent modest tightening of liquidity the Chinese central bank had expanded its monetary injections, with the rates for medium-term lending facilities (MLF) and the loan prime rate (LPR) holding steady.
Market rates will not change significantly and liquidity remains ample overall, meaning that returns on WMP’s can be expected to continue to remain low as banks continue change their models for the instruments.
A report from the Golden Credit Rating indicates that Chinese banks are continuing to transition towards net value WMP’s, and that new WMP’s are mainly fixed income products, while it has also become difficult for allocations to be made to high-yield non-standard assets.
Given prevailing competitive pressure on banks for funds, in the short-term bank WMP returns are likely to hold steady or slightly decline.
In the long-term the report also sees returns on bank WMP’s further declining following further market reforms of interest rates and a transition to net value instruments.
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