BoA: China’s Wealth Management Products Pose Systematic Risk

BoA: China’s Financial Products Pose Systematic Risk

The risk of a liquidity crisis in China’s bank-run wealth management product (WMP) space, the biggest “deposit” base of China’s shadow bank, is growing at an alarming rate according to Bank of America Merrill Lynch’s February 29 report on the sector.

According to figures from the Annual Report of the Bank WMP Industry, the total value of assets in WMP products increased 56% year-on-year during 2015 to a total of 23.5 trillion yuan (USD3.59 trillion). Last year’s growth even exceeded that of 2014 which had already set a high bar. In 2014, the balance of WMPs grew from 10.2 trillion yuan to 15 trillion yuan, up 47.25% year-on-year.

The banks reporting the greatest growth...