One day in October, 2015, a group of disgruntled investors gathered in Beijing to lodge a complaint: they had bought so-called wealth management products from a state-owned guarantor backed company that managed nearly $8 billion in assets, and which had collapsed later. Such defaults have been uncommon in China’s wealth management product space, but the now-gargantuan industry may pose a large risk to China’s financial system. Many risky aspects of the wealth management products industry make people worry about the possibility of a chain reaction similar to the 2008 financial crisis, when the US mortgage market buckled under similar strains.
The Variable Interest Entity seems like a “Deliberate Nod and Wink”
Michael Brennan, a renowned academic in finance, on the variable interest entity structure, China’s capital markets and the internationalization of the renminbi.
The Hidden Risks in Wealth Management in China
The government is putting wealth management in China under the microscope, and is slowly catching up with the inherent risk of wealth management products. Can banks continue to invent new skirting methods? Bank deposits are boring, says Jane, a new recruit at a local bank in Shanghai. In a country where the government holds deposit […]
China Roundup: Alibaba’s Soccer and Telecom Forays; and Metal Financing Crackdowns
The week that was: Alibaba’s soccer team stake and telecom plans; China wakes up to the risks in metal financing; China’s investments in food and agriculture businesses rise and KKR invests in Cofco’s meat production business. Metal Financing: the New ‘Shadow Banking’? While Beijing keeps a close eye on China’s shadow banking system, a new form […]
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