The China Banking and Insurance Regulatory Commission (CBIRC) has allowed China wealth management subsidiaries of domestic commercial banks to invest directly in Chinese shares for the first time.
Currently, wealth managers take holdings in Chinese stocks through mutual funds, which are likely to suffer following the move.
The de-regulation is designed to boost the Chinese stock market, which has fallen about 22% this year. Allowing private wealth to flow into the stock markets will also help stem the liquidity crises, it is hoped.
New regulations mean Chinese wealth managers can hold standardised debt assets and listed stocks. However, the balance of investments in non-standardized assets should not exceed 35% of the wealth manager’s net assets.
The announcement of a draft law was originally made in October but was rolled out following a consultation period.
New laws have also overhauled the asset management industry, allowing Chinese state banks to create wealth and asset management subsidiaries. Bank of China (BOC) was the first state bank to announce it was creating a wealth management subsidiary in November. The other state banks are expected to follow.
News also broke yesterday that UBS would increase its stake in UBS Securities, its securities joint venture in China, from 24.99% to 51% after securing the go-ahead from the country’s securities watchdog.