Across The Border | It’s a buyer’s market as Chinese banks scramble for cash, offer 7 pc yields on wealth management products
In a scramble to raise cash ahead of a review by the PBOC, banks are offering attractive yields on wealth management products through the end of June
Wealth management products, a main part of China’s shadow banking business, are suddenly hot again.
The annual investment yield even exceeds 7 per cent at some big state-owned lenders, as they scramble to entice savers and hoard cash ahead of a crucial inspection by the central bank.
But analysts say the yields, along with bank deposit rates, may reach their peak by the end of June, as the central bank is set to wrap up its review by month-end, after which the cash squeeze may ease. Tightened financial regulations may also limit banks’ issuance of riskier investment products for the rest of the year.
Wealth management products (WMP) are a popular savings tool in China, offering higher yields than deposits. But unlike bank deposits, they are uninsured and banks are usually not responsible if the products fail.
The yield rates for WMPs have spiked in the past few months. In May, the average annualised yield issued by Chinese banks increased to 4.24 per cent, up for a sixth straight month, according to data from Chinese financial information site rong360.com.
As liquidity is highly strained, banks are fighting for savers’ cash by raising yields on WMPs, deposit rates, as well as interest rates on certificates of deposit
Some lenders even promised an annualised return of more than 7 per cent. For example, a WMP derivative linked to the large-cap CSI300 Index on the Shanghai Stock Exchange, issued by Bank of Communications on June 1, offered a 7.15 per cent annualised return.
