Four Fresh Worries About China’s Shadow Banking System


Draft rules seeking to shore up the $3.9 trillion market for wealth management products underscore a bunch of new worries.

The tangled web of Chinese banks and the investment products they sell is growing more muddled as analysts attempt to gauge the impact of new rules unveiled by the country’s authorities.

The proposed new rules would require some banks to provision for losses against wealth management products (WMPs), which funnel money from retail investors into securities ranging from stocks to corporate bonds and real estate, in an effort to insulate the lenders from future losses.

The 26.3 trillion yuan ($3.9 trillion) worth of WMPs outstanding have emerged as key cog in China’s so-called shadow banking system as investors often expect to be reimbursed for on any losses on the WMPs banks manage — an expectation that could weigh on the lenders if the products begin to sour…

Four Fresh Worries About China’s Shadow Banking System

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