A Brief Note On Wealth Management Products And Chinese Shadow Finance

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Section Two: Learning goal 3.3 Discipline Research WMP (Wealth Management Products) and Chinese Shadow Finance Introduction The purpose is to investigate an area of interest which relates to my major, finance. This topic also relates to my role in my CPO as I was working as an Financial assistant. Based on what I have observed in my CPO and what I have learnt in the university, I realized that the chaotic wealth management product (WMP) market has caused the shadow finance issue in China to deteriorate further. To begin the research, I will first illustrate how the research topic relates to my CPO and the banking industry in China. Next, I will address the research topic under each subheading and draw a conclusion:  What is WMP ? …show more content…
Now the government is tightening the leash of WMP sales in banks and other financial institutions, and hoping to hold the aggressive growth of the shadow banking sector in check. Therefore, this research will help me understand more about an important issue in my CPO and banking sector in China. What is WMP ? Wealth management products, or WMPs, are sold by banks as a substitute for deposits, which essentially a pool of securities (trust products, bonds, stock funds). They are sold as low-risk investments (usually yield on average 2 percentage points higher than bank deposits) but often are not so. In real world, wealth management products are often sold as short-term investments that offer significantly higher returns than the famously anaemic deposit rates mandated by China’s central bank. The interest rates of WMPs can be set freely by banks and many of the assets and liabilities reside off-balance sheet. Take the "Bank of China Progress series wealth management product" for an example. It is linked to gold and oil trends. Therefore, assuming that the prices of the two commodities, namely, gold and oil, are both above 110% of their respective original prices at the expiration of the product, investors are able to obtain 100% of the guaranteed principal and the yield at an annual rate of

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