Direct investment allowed in wealth management products

(ECNS) -- China will allow commercial banks to open capital and securities accounts independently to facilitate direct investment in wealth management products, according to a source at the China Banking Regulatory Commission (CBRC).

Based on the draft regulation "Supervision and management measures for commercial banks' wealth management products," financial products are no longer confined to banks. The draft has provided a direct channel for banks and capital trade markets.

However, regulators from the CBRC told journalists that direct investment is not direct financing, and that it does not mean a direct route to enter the stock market.

Statistics show that there are nearly 500 commercial banks releasing and registering wealth management products, handling nearly RMB12.65 trillion (US$2.1 trillion) in total.

Trillions of RMB will be directed into the capital markets during the next few years, according to a research report by Haitong Securities, a major securities firm in China.

Experts are not sure whether the current bullish stock market is sustainable, said Cai E'sheng, vice chairman of the CBRC.

"No matter where the funds come from, a healthy market should not develop like this," he added.

The draft regulation is designed to address the problems of implicit deposit guarantees and rigid earnings potential, and to facilitate the healthy development of wealth management products.