China Default Chain Reaction Threatens Products Worth 35% of GDP
- Wealth management products are now investing in other WMPs
- Layered liabilities show parallels with U.S. before ’08 crisis
Defaults Threaten China's Wealth Management Market
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The risk of a default chain reaction is looming over the $3.6 trillion market for wealth management products in China.
WMPs, which traditionally funneled money from Chinese individuals into assets from corporate bonds to stocks and derivatives, are now increasingly investing in each other. Such holdings may have swelled to as much as 2.6 trillion yuan ($396 billion) last year, based on estimates from Autonomous Research this month.