China’s online wealth management index falls for first time in five years as sector hit by tighter regulation

An index measuring the growth of China’s internet wealth management industry has fallen for the first time since 2013 as tighter regulations on shadow banking force some platforms to withdraw from the market.

The index, which tracks the size of internet wealth management funds in proportion to the total financial assets held by Chinese citizens, declined to 563 points in 2018, down 23.5 per cent from the peak level of 695 points in 2017, according to a report released at a finance summit hosted by Tencent Holdings in Shenzhen on Sunday.

“The development of the internet wealth management market has been negatively impacted by the tightening regulations such as the campaign targeting P2P lending,” said Yin Jianfeng, deputy director of National Institute for Finance and Development, which co-authored the report with Tencent.

In the two months from June to August, 243 online lending platforms closed amid an intensified crackdown on shadow banking, part of a broader campaign by the central government to reduce risk in the financial system. Some investors even took to the streets to protest, demanding the government help them recover investments lost on failed platforms.

“Poorly run platforms were forced to withdraw from the market. The numbers and growth have both declined,” Yin added. “However, from a longer term perspective, the strict rules will benefit the industry so it can develop in a healthier way.”