China: China Strengthens Its Regulation On Wealth Management Products

Last Updated: 22 October 2008
Article by David Olsson and Kennies Fung

Originally Published on 24th April 2008

The China Banking Regulatory Commission (CBRC) has issued a notice to strengthen its regulation on wealth management products issued by banks in China. This follows on from the increase in customer complaints and disputes regarding new financial products that have recently entered the rapidly changing Chinese economic market.

In recent years, as China's economic reform policies have gradually liberated and opened up the banking industry, a number of new financial products, such as fund investment products, QDII products, derivatives and some other comprehensive wealth management products have been rapidly introduced into this promising market.

However, there has been an increasing number of customer complaints and disputes related to the wealth management business in China. The CBRC has attributed these issues to:

  • the investors' lack of knowledge in wealth management products and the associated risks of investing in such products, and
  • the non-compliance by some banks with the requirements set out in the Provisional Rules on Commercial Banks' Wealth Management Business (Provisional Rules) and the Guidance on Risk Management of Commercial Banks' Wealth Management Business (Guidance), both of which were issued in September 2005.

In response to these problems, the CBRC issued a Notice on the Issues Relevant to Further Regulating Commercial Banks' Wealth Management Business (YJBF [2008] 47) (Notice) on 3 April 2008. The Notice recapitulates the provisions set out in the Provisional Rules and the Guidance and introduces some new provisions in the following six areas:

  • product design
  • customer evaluation mechanism
  • product advertisement and marketing activities
  • disclosure of information
  • complaints procedures, and
  • management of sales staff.

Product design

The Notice specifies that the name of the wealth management product must not be misleading or contain any language that is ambiguous. It also restricts banks from selling any wealth management products without market analysis or forecast and without any basis for their pricing.

While banks should set the minimum threshold for their wealth management products based on the risk involved in the products and the risk tolerance level of the target investor group, the minimum threshold must not be lower than RMB 50,000 (or its equivalent in any foreign currency).

One of the most important provisions in the Notice is that banks are prohibited from selling offshore funds or any other offshore investment products which are not permitted by PRC law. It requires banks to design and develop the wealth management products by themselves. This restriction is unclear and seems to contradict the Notice of the Adjustments to the Offshore Investment Scope of Overseas Wealth Management Business of Commercial Banks on behalf of Their Clients issued by the CBRC in May 2007.

Further clarification on the scope of such restriction is necessary to further assess its impact on the arrangement between the offshore product manufacturers and the QDII banks in relation to the purchase of offshore investment products by the QDII banks. Mallesons is currently in consultation with the CBRC on the practical implication of this restriction and will keep you updated.

Customer evaluation mechanism

One of the areas that the CBRC has identified as problematic is investors' lack of knowledge of investment risks. Through the Notice, the CBRC highlights the key requirements that banks should satisfy when evaluating the financial position of their customers. The CBRC has requested banks to establish a client assessment mechanism and conduct "know-your-client" procedures to fully understand their clients' position. This includes a thorough understanding of the client's financial position, investment objective, investment experience, preferences on risks and return on investments.

Under the Notice, banks are now required to conduct onsite face to face customer evaluations in order to determine the suitability of the wealth management products for the customer. Such evaluations cannot be conducted via the internet or by phone.

Product advertisement and marketing activities

The marketing materials for wealth management products must disclose the key features of any important issues relating to the products. Risk disclosure statements should be displayed on the most prominent area on the first page of the marketing materials with an explanation of the worst case scenario and the worst results of the investment. The Notice also prohibits banks from including the words "anticipated yield" or "highest yield" in the marketing materials if they cannot disclose the calculation mechanism or provide an accurate basis for a forecast of the wealth management products.

If the marketing materials contain information of the past performance of a certain product or business or forecasts as to any future performance, the marketing materials should:

  • set out the period of evaluation of performance and source of such information, and
  • warn the readers that past performance or forecast of future performance should not be taken as a reliable basis for the ultimate performance of the product.

Disclosure of information

The Notice imposes a minimum requirement that bank statements relating to the wealth management products must be provided to the customers on a monthly basis.

Banks are also required to take measures to ensure that their customers will receive the information disclosed by them. The agreement between the banks and their customers should specify means of communication or disclosure of information. Information relating to the wealth management products disclosed on the websites of the banks will not be treated as being received by the customers unless such form of disclosure has been agreed by the customers.

Complaints procedures

The Notice reinforces the need to establish a transparent, efficient and comprehensive mechanism to deal with customer complaints. This also entails allocating sufficient resources to ensure the effective operation of the customer complaints system.

Management of sales staff

The Notice re-emphasises the importance of maintaining a comprehensive system to manage wealth management employees in the banks.

In the Notice, the CBRC requests all banks to conduct self-inspection of their wealth management business and file their self-inspection and rectification reports with the CBRC by 30 May 2008. The local CBRC will also conduct anonymous inspections of banks in their own jurisdictions and report to the CBRC by 30 April 2008.

The views set out in this publication are based on our experience as international counsel representing clients in their business activities in China. As is the case for all international law firms licensed in China, we are authorised to provide information concerning the effect of the Chinese legal environment. However we are not admitted to practice Chinese law and so are unable to issue opinions on matters of Chinese law.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.