China’s Wealth Management Market Transformed by Launch of New Asset Management Rules


China’s market for wealth management products (WMP) has undergone profound change in the more than three years since the launch of new asset management regulations that sought to address risk in relation to use of the instruments as funding sources by banks.

As of the end of June the value of interbank WMP’s had contracted by 96% compared to their peak value, while for principal guaranteed WMP’s the decline relative to peak value was 97%, according to the latest official data.

Non-compliant short-term products saw a decline of 98% compared to their peak value, while the “nested investment scale” had fallen by 24%.

Net value WMP’s have also gradually emerged as the mainstream form of WMP, amidst a push for their adoption from Chinese regulators ever since the launch of the new asset regulations in early 2018.

The second quarter of 2021 saw the issuance of 7487 net value WMP’s, for an on-quarter increase of 13.1% and a YoY rise of 45.29%, according to figures from Rong360.

“As the transitional period for the new asset management regulations enter its final stage, following the breaking of implicit guarantees we forecast that anticipated yield products will gradually withdraw from the market, as will protected principal WMP’s,” said Yu Ke (余可), analyst from PY Standard to Financial News. “The scope and share of net value products will steadily increase subsequently.”

On 27 April 2018 China’s financial regulators officially launched 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), as part of broader efforts to contain risk in the financial system.

One the chief goals of the new rules was to remove the “implicit guarantees” on WMP’s that Chinese regulators were concerned had become a major source of moral hazard and risk for China’s financial system.

While regulators originally outlined a transitional period for these asset management rules that was scheduled to conclude at the end of 2020, this period was extended to the end of 2021 in response to the impacts of the COVID-19 pandemic.