WEALTH MANAGEMENT | Cesar Tordesillas, China

China's fund companies slug it out with banks offering WMPs

China's fund management companies are seeking to compete with wealth management products sold by commercial banks.

This could be seen by the number of new fixed-income mutual funds being applied for by Chinese fund companies, which more than doubled this year compared with 2011.

Fund companies have submitted 45 applications to raise new, dedicated fixed-income funds this year, compared with 19 such applications in the final eight months of 2011, according to figures from the China Securities Regulatory Commission.

The CSRC has approved 17 fixed-income funds this year, while 28 applications are pending. Only one such application was approved in the last eight months of 2011.

The flood of applications comes in the wake of two wildly successful fund launches earlier this month, both for ultra-short-term, low-risk products that compete directly with wealth management products.

A 30-day bond fund launched by China Universal Asset Management raised 24.4 billion yuan in just seven days at the beginning of May, according to the company's website. Another 30-day fund by Huaan Funds raised 18.2 billion yuan in six days.

Such short-term funds aim to fill the gap created when China's banking regulator late last year banned commercial banks from issuing WMPs with ultra-short maturities.

WMPs sold by banks - which promise returns far above bank deposit rates - have sucked up household savings that might otherwise have flowed to fund companies.

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