(CRIENGLISH.com)
Updated: 2008-01-05 11:41

Sales of individual wealth management products in China shot up in the last quarter of 2007 as banks expanded their product offerings, according to Financial Times, citing China Banking Regulatory Commission (CBRC).

By the end of September, there were 60 banking institutions in China offering individual wealth management services such as mutual funds, insurance products and offshore investments. Together, China's banks sold 600 billion yuan ($82 billion) worth of such products in the first three quarters of 2007.

With inflation hitting an 11-year high of 6.9 percent in November and the one-year deposit rate at only 4.14 percent, Chinese investors are faced with negative real interest rates and have been looking for alternatives to bank deposits.

The government is actively encouraging Chinese banks to diversify from their traditional reliance on the spread between deposit and loan interest rates, which are set by the central bank to ensure profitability at the state-owned lenders.

According to Zhang Xi, an analyst at Galaxy Securities, the revenues Chinese banks make from personal wealth management products is very low compared to their overall revenue, with direct transaction fees of 1 percent at the most.

He added that the main purpose of these products is to turn fixed deposits into demand deposits, reducing the amount of interest they must pay and stimulating revenues.

In June last year, the CBRC set a target for large and medium-sized State-owned banks to increase their fee-based income from about 17 percent of their total now to 40 to 50 percent within the next 5 to 10 years.