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Sea of change for small investors

Tuesday, November 28, 2017

Retired Shanghai truck driver Shen Xipei shunned risky stocks and low-yielding deposits and instead put his life savings into a wealth management product (WMP) sold — and guaranteed — by a bank.

Soon, however, investors such as Mr Shen may start switching into other assets after Beijing published draft guidelines on November 17 to ban financial institutions from guaranteeing investors against losses, tightening supervision of what the central bank says is a $US9 trillion ($F18t) asset management industry.

A move away from bank WMPs by armies of Chinese investors — which some analysts expect — would likely trigger a seismic shift in China's asset management industry, with the new rules apparently favoring transparent mutual fund products.

"I bought the WMP because I trust banks. They don't run away with your money," said 63-year-old Shen.

The product he bought from Industrial Bank promised an annualised return of about 4.15 per cent — far exceeding the 1.5 per cent yield on one-year bank deposits, he said.

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