China’s bank wealth management products (WMP) have shrunk by RMB 1.38 trillion ($200 billion) in the first quarter, reports Caixin. This comes as banks prioritized deposit growth and market volatility weighed on flows. 

Bank WMP balances fell to RMB 31.91 trillion at the end of March from the end of last year, according to data from China Wealth (Asset) Management Registry and Custody, though still up 9.5% from a year earlier. The firm is a state-owned industry registry.

Despite signs of a rebound in April, asset allocation for WMPs remains a challenge. Falling short-term bond yields and deposit rate cuts have constrained returns, leaving managers with limited higher-yielding assets, industry insiders say.

Vietnamese lender SHB and China’s Huawei Technologies Group signed a ​strategic cooperation agreement on Sunday, reports Reuters citing SHB. The move will allow the Chinese technology giant to expand its presence ​in Vietnam.

Under the agreement, Huawei will support SHB in designing technology architectures and building data platforms. It will also support the bank in ensuring stable and safe operations, the bank said in a statement. 

Chinese household borrowing posted a record drop in February, reports Caixin. Household loans fell by RMB 650.7 billion ($94 billion) during the month, the largest contraction on record, according to data released Friday by the People’s Bank of China.

Total social financing (TSF)—a broad measure of credit and liquidity in the economy—increased by RMB2.38 trillion in February, exceeding economists’ average forecast of RMB 1.86 trillion in a Caixin survey. New yuan loans reached RMB 900 billion, slightly below expectations.

The drop in household borrowing was broad-based. Short-term consumer loans fell by RMB 469.3 billion, while medium- to long-term loans, a proxy for mortgages, declined by RMB 181.5 billion.

China will issue special sovereign bonds to recapitalize some of its largest banks, reports Bloomberg. The move marks an expansion of Beijing’s efforts to fortify the nation’s $69 trillion financial system against a cooling economy and market volatility.

A total of RMB 300 billion ($44 billion) worth of special government bonds will be sold this year to replenish core tier-1 capital at large commercial banks, according to a Ministry of Finance report seen by Bloomberg.

The fresh capital injection is designed to provide banks relief for profit margins, which have been eroded by falling interest rates. The capital allows for expanded lending capacity and larger provisions for potential bad debts.

China’s interbank market regulator has revealed new rules for technology and innovation bonds, reports Caixin. The move aims to steer more funding into hard tech sectors and address a structural imbalance that has favored state-owned giants over private firms.

The National Association of Financial Market Institutional Investors (NAFMII) on Monday released updated guidelines, set to take effect March 9. The move tackles a key obstacle in China’s drive for technological self-sufficiency. Although sci-tech bonds were created to finance innovation, issuance has been dominated by state-owned enterprises, with private firms accounting for less than 8% of total issuance across the market. 

Under the revised mechanism, a tiered system will govern how issuers deploy proceeds. Companies with average annual R&D spending exceeding RMB 1 billion ($145 million) or an R&D-to-revenue ratio above 3% over the past two years will enjoy greater discretion in the use of funds. Issuers that fail to meet those thresholds must allocate at least 30% of proceeds to technology-related purposes, including project construction, R&D or mergers and acquisitions. Private technology companies are exempt from the 30% requirement, granting them the same flexibility as high-R&D spenders in an explicit effort to encourage their participation.