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China mulls tightening wealth-product rules: report

[SHANGHAI] China's banking regulator is considering tightening rules for the nation's more than US$3 trillion market for wealth-management products, including caps on investments in equities, the 21st Century Business Herald reported, citing unidentified people. Chinese stocks slumped.

All lenders could face caps on the investment of wealth-management product proceeds in shares, the report said. Smaller banks with weaker capital could be banned altogether from putting the money into equities and "non-standard assets," it said. Non-standard assets are often loans.

The China Banking Regulatory Commission didn't immediately reply to a fax seeking comment.

So-called WMPs have traditionally funneled money from Chinese individuals into assets from corporate bonds to stocks and derivatives. The risks associated with the products may be rising as banks struggle to find enough good assets to invest in.

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The outstanding value of China's WMPs rose to 23.5 trillion yuan (S$4.78 trillion), or 35 per cent of the country's gross domestic product, at the end of 2015, from 7.1 trillion yuan three years earlier, according to China Central Depository & Clearing Co.

About 7.8 per cent of the outstanding products were invested in equities and 15.7 per cent in non-standard credit assets, the data show.

The Shanghai Composite Index fell 1.6 per cent as of the city's 11:30 am trading break, while the ChiNext Index slumped 4 per cent.

The CBRC may also ban banks from working with securities firms or funds through so-called "asset management plans" that invest in non-standard assets, leaving them to only work with trust firms, the Business Herald said.

The regulator met with some banks this month on the rule revision and a final version hasn't been drafted, according to the report.