China to delay new rules for wealth management products

Pedro Gonçalves
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Regulators in Beijing may delay the introduction of new rules on the country’s $4.5 trillion wealth management product (WMP) sector in an bid to avoid further market turmoil.

The drafted WMP rules, part of the national develeraging campaign to curb financial risks, were supposed to be introduced in early July after being reviewed for comment by a select group of market participants. However, the regulators have since decided to wait because of the recent slump in Chinese stocks and in the yuan, banking sources told chinese newspaper Caixin.

Official data showed 562 banks held 29.54 trillion yuan ($4.45 trillion) in outstanding WMPs at the end of 2017.

China Banking and Insurance Regulatory Commission (CBIRC) is likely to adjust the limit for bank wealth management products’ exposure to non-standard investments, known widely as “shadow banking” products, as reported by International Investment.

The drafted WMP rules, designed as a key supplement to the asset management rules issued in April, are set to impose more stringent requirements on the investment scope of banks’ wealth management products, limiting their exposure to nonstandard investments subject to growing leverage and liquidity risks.

The rules have faced strong resistance from the industry as WMPs remain one of the most profitable businesses in finance, but regulators appear determined to go ahead.

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