The latest official data indicates that the wealth management subsidiaries of Chinese banks have emerged as major investors in the domestic capital market.
At present Chinese regulators have given their approval to 21 domestic banks to establish wealth management subsidiaries, while 17 of these company have already obtained approval to commence operations.
The establishment of these subsidiaries arrives in the wake of new asset management regulations launched at the start of 2018, which removed the “implicit guarantees” on WMP’s issued by banks, depriving smaller lenders of a key means of accessing funds.
Figures from the China Banking Association (CBA) indicate that as of the end of June 2020 the direct allocations of bank wealth management product (WMP) to assets in the real economy totalled approximately 19.3 trillion yuan, equal to 7.1% of total social financing.
At the end of June bank wealth WMP investment in bonds totalled around 14 trillion yuan, for an increase of 2 trillion yuan, or 16%, compared to the figure at the time of the release of China’s new asset management regulations in February 2018.
Bank WMP investment in stocks totalled 790.7 billion yuan, accounting for 1.5% of the market value in circulation of the Shanghai and Shenzhen bourses.
As of the end of June the bank WMP balance was 22.1 trillion yuan, remaining essentially stable over the past three years.
Net value bank WMP’s that better satisfy the requirements of the new asset regulations have increased 225% since February 2018, while short-term bank WMP’s have contracted 28% over the same period.