Tsinghua University Finance Expert Highlights Eight Problems with China’s Wealth Management Market

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A leading finance and banking expert from one of China’s top tertiary institutions has highlighted a range of problems in the country’s wealth management sector.

Zhang Jianhua (张健华), head of Tsinghua University’s Financial Development and Regtech Research Centre and formerly the head of Huaxia Bank, said during a live broadcast on 26 March that China’s wealth management market currently faces eight key problems.

  1. Insufficient diversity of products. No means of fully satisfying the needs of different investors. Inadequate standardisation of certain products.
  2. Frequent problems with sales in breach of regulations – in particular certain comparatively complex products for which consumer protections are insufficient.
  3. Inadequate investment management capability. In particular, high variation in the equity investment capabilities of wealth management subsidiaries in the banking system.
  4. Insufficient financial understanding on the part of consumers. The concept of balanced asset allocation has not yet been establishment, and in particular there is still a large variation in insurance awareness.
  5. The concept of qualified investors who independently bear investment risk has not yet been comprehensively established. The concept of “product exchange” has not yet been completely removed.
  6. The advantage that bank wealth management products had of investment in non-standard assets has basically been lost. In the past bank wealth management products invested in numerous non-standard products, yet because requirements with regard to term allocations are now stricter, banks have basically lost these advantages.
  7. Regulatory rules for the three categories of institutions have not yet been fully unified, and the problem of regulatory arbitrage still exists.
  8. Sales by online platforms. The direction of development is towards the Internet and digitisation. Financial institutions have also made large-scale changes, and are capable of engaging in effective online sales. However, there is still a lack of consistent regulations for sales by third party platforms, with some activities strictly prohibited, others permitted, and others subject to licensing.

As of the end of 2021, China was host to 301 banks and 21 wealth management companies that provided a total of 36,300 outstanding wealth management products, for a slight decline compared to a year previously.

These WMP’s represented outstanding funds of 29 trillion yuan, for a year-on-year (YoY) rise of 12.14%.