Reform and Stricter Regulation of Bank Wealth Management Products in China

The outstanding amount of the collective investment schemes ("wealth management products") originated and marketed by Chinese banks has increased substantially in recent years. The rules and regulations governing these products began to take shape in 2005 and have been tightened since the global financial crisis of 2008. We attribute the rapid growth of these products to (1) the real economy's need for a greater variety of funding channels and (2) the demand for financial products offering deregulated interest rates from investors dissatisfied with regulated bank deposit rates. The problems posed by these products will need to be resolved just when regulators in China are seeking to carry out further reform of the country's financial and capital markets