China: Shadowy wealth management products - Rabobank

Michael Every, Head of Financial Markets Research at Rabobank, notes that in China Bloomberg has a terrifying story about shadowy Wealth Management Products, which have offered yields of up to 8% in an economy with a 1.75% base rate, slowing growth, and squeezed corporate liquidity.

Key Quotes

“With these WMPs having surged in volume, and having bought other WMPs to help generate higher returns, the headline rightly reads “China Default Chain Reaction Threatens Products Worth 35% of GDP.” That’s as the US looks to raise rates, putting downward pressure on CNY, and raising the risk of a further surge in capital outflows.”