The last two years have been tough for China’s life insurers. Regulations that were introduced in late 2010 and early 2011 have made it much harder to sell products through branches of banks according to the bancassurance model. The insurers’ products have also suffered as a result of stiff competition from various quarters. However, various new policies that have been announced by the China Insurance Regulatory Commission (CIRC) through late 2012 should make it easier for the life insurers to boost their premiums and to increase their investment assets under management (AUM).
Retail investors remain confident about bank wealth management products (WMPs) despite growing regulatory concern and a number of high-profile defaults in recent months, according to new China Confidential survey data. This suggests that a sell-off of WMPs by retail investors is unlikely in the short-term, although there are signs that wealthier investors may be slightly less enthusiastic about WMPs than they were six months ago.
The China Banking Regulatory Commission (CBRC) announced on Wednesday its most significant attempt yet to rein in the riskier aspects of a ballooning wealth management product (WMP) market that had Rmb7.6tn under management at the end of 2012. We think the new measures – which target the most opaque forms of WMP – may significantly affect the business of those banks which have sold a high proportion of non-principal protected WMPs. We also think that the moves may divert funds away from the shadow financial system and into formal assets such as stocks and bonds.
Research by FT China Confidential in mid-March 2013 has found that a wave of defaults by Wealth Management Products (WMPs) which causes a meltdown in China’s financial system – an outcome which some commentators have fretted about recently – is very unlikely. However, particular banks would be vulnerable to a run on the WMPs that they have issued.
The authorities in Beijing have relaxed several restrictions on the renminbi Qualified Foreign Institutional Investor (RQFII) scheme, marking another step forward in the liberalisation of China’s capital controls.
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