Attractive returns on wealth management products reflect liquidity squeeze
Wealth management products with returns of up to 10 per cent are a boon for investors, but represent systemic problems at China's banks
Bank accountant Amanda Li is counting down to annual bonus day.
She said the 50,000 yuan (HK$63,400) she expects to receive could earn 750 yuan in interest for a three-month investment in a wealth management product (WMP) - a 6 per cent annualised return that she could use to buy herself a pair of boots.
"Wealth management products usually offer high interest rates at the end of the year as banks boost deposits to meet regulatory requirements," she said. "This year, the rates are especially enticing."
Among the 358 wealth management products offered by banks last week, the average annualised interest rate was 6 per cent, according to CN Benefit, a Beijing-based financial consulting firm.
That compares with returns of 4 to 5 per cent before China's interbank rate surged from the middle of last month.
The money market's benchmark seven-day repo rate touched a post-June high of 9.8 per cent on December 19 and remained high in the following days until the central bank kicked off a 29 billion yuan, seven-day reverse repo on December 24.