China Enacts New Rules For $1 Trillion Cash Management Market

China Enacts New Rules For $1 Trillion Cash Management Market

June 11, 2021 at 05:57PM

China’s Banking and Insurance Regulatory Commission (CBIRC) has imposed new rules on wealth management products for cash, a move that puts stricter controls on the trillion-dollar market.

According to Reuters, the commission on Tuesday (June 8) banned these products from investing in stocks and convertible bonds, and said the leverage level of each product should typically not exceed 120 percent.

In addition, the regulator is asking commercial banks and wealth management firms to perform “stress tests” on these products to be sure they can withstand urgent redemptions. The products in question are those “investing in monetary market instruments only and open for purchases and redemption on every trading day,” the commission said.

According to China’s Banking Wealth Management Registration and Depository Center, wealth management products for cash represented a 7.34 trillion yuan — or $1.15 trillion — market as of the end of March.

This news comes as a new report found that global wealth levels reached the $250 trillion mark in 2020 amid a spike in household savings. The report — conducted by Boston Consulting Group and titled “Global Wealth 2021: When Clients Take the Lead” — argues that global wealth has grown in the last year and will do so for the next five years.

The key generators of wealth will be North America, Western Europe and Asia, not including Japan, the report found. The BCG also talked about people known as “simple needs” — with assets between $10,000 and $3 million — who could be useful to wealth managers. These people have $59 trillion in wealth ready to invest and could add $118 billion to the global revenue pool, the report said.