Amid tightened regulatory demands wealth management product issuance in China has slowed to a crawl.
China's fast-expanding wealth management industry has been considered a source of financial risk, as off-balance-sheet wealth management products (WMPs) channel deposits into risky investments with questionable regulation.
A new report from Moody's Investors Service Investors Service claims that China's banking sector has seen moderated growth in the production of new WMPs as the country has stepped up efforts to contain risks in the financial industry.
Shadow Banking Worries
The outstanding balance of WMPs issued or distributed by banks reached $4.4 trillion as of April 2017, indicating 16.4-percent year-on-year growth, slower than the 23.6 percent in 2016 and 56.5 percent in 2015, according to the report.
As part of the country's deleveraging efforts, the banking regulator, the China Banking Regulatory Commission, has strengthened supervision of WMPs this year, requiring lenders to clearly disclose risks to investors while prohibiting them from using their own funds to invest in WMPs they themselves have issued.
Enhanced regulatory policy measures and guidelines should further constrain the growth of off-balance-sheet WMPs, which has been one of the fastest-growing components of the shadow banking sector, said Moody's in the report.
