Regulations cool China's wealth management product boom

Bloomberg reports China’s multi-trillion dollar boom in wealth-management products, under scrutiny around the world because of potential threats to financial stability, is set to cool as yields fall on tighter regulation, according to China Merchants Securities Co. analyst Ma Kunpeng. Ma cited a “significant slowdown” in the products’ growth in the first half and said that WMPs may shrink in the future. Banks have started to lower yields on WMPs in preparation for requirements for funds to be held in third-party custody, the analyst said, adding that such a change may be implemented over six months to a year and will eventually help defuse risks in the system. Currently, banks can use money generated from investment assets for longer-term products to help make payments on shorter-maturity products.