3 features of China's pilot wealth management products

China's pilot wealth management products aimed at retail investors looking to boost their retirement savings will have three main features-long-term investment, sound investment and financial inclusion, an industry expert said.

Chinadaily reports that long-term investment, sound investment and financial inclusion are the 3 keys features of China's pilot program of wealth management products.


"The pilot program of wealth management products launched by China in four cities is an important step to deepen supply-side structural reform in the financial sector and to promote common prosperity," said Zhang Xuyang, chairman of Everbright Wealth Management Co, a wholly owned subsidiary of China Everbright Bank Co. "The product term for closed WMPs for retirement planning will be at least five years, longer than that of other WMPs, and the money raised will be used for long-term investments. Financial institutions participating in the program will encourage investors to start retirement planning when they are still young and will try to mobilize their medium- and long-term precautionary investment needs, with the aim of helping investors share China's economic achievements via medium- and long-term investment strategies."


The China Banking and Insurance Regulatory Commission announced on September 10 the launch of a pilot program of wealth management products for retirement planning in four cities, namely Wuhan, Hubei province; Chengdu, Sichuan province; Shenzhen, Guangdong province, and Qingdao, Shandong province.


"Adopting the mindset of 'taking small steps and making gradual but steady progress', we chose the four cities based on comprehensive consideration of the size of the cities, the level of economic and social development, and residents' pension demands, while also taking into account the needs in eastern, central and western regions of the country," said Wang Zhaodi, chief examination officer and spokesman of the CBIRC, at a news conference on Oct 21. "Pilot wealth management products for retirement planning have entered into the phase of regulatory reporting and may be available to consumers at the end of this month or next month." 


Based on the risk management capacity of participating institutions, the CBIRC decided to cap the total amount of funds raised by each financial institution taking part in the program at 10 billion yuan ($1.57 billion) and cap the total value of WMPs for retirement planning purchased by each investor at 3 million yuan, he said.

Pilot WMPs for retirement planning will soon be available to the general public, with minimum investment set at 1 yuan. In addition, institutions participating in the program will charge fees for such products at favorable rates, said Zhang of Everbright Wealth Management.

Moreover, the regulator requires wealth management companies participating in the pilot program to put their WMPs for retirement under the independent custody of a third party rather than under the custody of their parent banks. This will make their risk management mechanisms sounder, he said.

The pilot program of WMPs for retirement is one of the reforms carried out by the CBIRC to further promote the development of a multilayered, multi-pillar pension insurance system in China. The regulator is also doing research and joining hands with other government departments to make a detailed implementation plan for the launch of a retirement savings pilot program, said Wang of the CBIRC.