Wealth management

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

  • In the two months from June to August, 243 online lending platforms closed amid an intensified crackdown on shadow banking
PUBLISHED : Monday, 17 December, 2018, 2:28pm
UPDATED : Monday, 17 December, 2018, 10:00pm

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.

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“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.”

Online wealth management has seen a 15-fold increase in value in the past four years, from 215.3 billion yuan (US$31 billion) in 2013 to 3.15 trillion yuan last year. The index rose to 695 points in 2017 from a base level of 100 points when it was established in 2013.

The decline in the online index comes at a time when growth in the total wealth management market, including online and offline, is slowing. China’s total wealth management market was worth 132 trillion yuan in 2018, up just 1.5 per cent from 130 trillion yuan in 2017. The value of investment trusts, asset management in brokerages, and separately managed accounts have fallen by 2, 1.2 and 2.7 trillion yuan respectively in 2018.

“Chinese people will invest more into capital market products such as stocks and debt through third platforms,” said Yin. “Investments into capital markets will gradually replace investment into property and deposits.”