Wealth management product

A wealth management product is an uninsured financial product sold in China by banks and other financial institutions. Typically they offer a high rate of interest, and, sometimes, guaranteed return. As of 2016, $2.8 trillion had been sold by banks during the previous 5 years. While the government sometimes intervenes to prevent losses by investors, some have failed.[1]

Financial experts such as David Daokui Li of Tsinghua University, a member of the Chinese central bank’s monetary policy committee, believe wealth management products pose a substantial danger to China's financial stability.[1]

Chinese consumers have embraced mobile payment apps on a large scale, which have gone on to spawn large money-market funds investing in high-yielding wealth-management products. This has led to the accumulation of risks in opaque shadow banking. For making this transparent, the traditional lenders in payments need some support, an area where financial technology has left them far behind. According to DBS Group Holdings Ltd. economist Nathan Chow, China's official digital yuan, which will be pushed out to consumers via banks, seeks to restore this missing balance; it will allow authorities to “regulate an overstretched debt market more effectively.”[2]

Wealth management products grew rapidly throughout 2015 and 2016. Chinese households, companies and banks held a record balance of $3.9 trillion (26.3 trillion yuan) of wealth management products as of June 30, 2016.[3]