Professor Sung Won Sohn on China’s Wealth Management products

$3.5 Trillion – that is the size of China’s Wealth Management products (WMP) market and it is estimated to make up 35 percent of GDP. Authorities are concerned and want to reign it in. Retail investors are the majority of buyers of WMP’s which offer higher interest rates than a bank deposit. But it isn’t always clear what assets the funds are buying to finance payouts, and that’s where potential problems loom. China’s banking regulator is proposing tighter rules to protect investors. The regulations would cap the involvement of smaller banks and ensure that lenders have enough capital to protect against potential losses. For over two years ratings agencies like Standard and Poors and Fitch have warned that WMP’s were creating growing risks in the Chinese banking sector and analysts

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