China’s Wealth Management Product Market Reaches $3.6 Trillion

China’s asset management industry continues to be dominated by wealth management products (WMPs), which hit a record RMB23.5 trillion (US$3.6 trillion) in 2015, according to Cerulli Associates.

Despite the turbulence in Chinese stock markets in the second half of 2015, mutual fund assets under management (AUM) expanded by 80.9% year-on-year to hit RMB8.5 trillion (US$1.3 trillion) by the end of 2015.

Mutual fund net new inflows amounted to RMB3.1 trillion last year, supported by net inflows of RMB2.3 trillion to money market funds and RMB0.7 trillion to balanced funds.

But with the dominance of WMPs, Chinese banks maintain their leading position in China’s asset management industry ahead of trusts, insurers, and fund management companies.

However, banks will face challenges in 2016 because of a shortage of quality investment targets.

"Along with many maturing quality non-standard products that generated excess returns for banks and a tightening of regulations on investment for these products, the yield of banks’ WMPs is expected to continue to decline this year," says Miao Hui, senior analyst at Cerulli.

Nonetheless, Cerulli expects that banks’ outsourcing business will grow, especially via mandates from small and mid-size banks in the mainland, including rural financial institutions.

"With their familiarity with capital markets and flexibility in using leverage, fund management companies and securities houses will possibly gain more mandates from banks this year," Hui adds.

China Expert Network