China's wealth management products market regained momentum during the first half of the year, with the balance of outstanding bank wealth management products reaching 30.67 trillion yuan ($4.31 trillion) by the end of June. The figure marked a 2.38 percent increase from the beginning of the year.

The upward trend in overall market scale is likely to persist through the rest of 2025, said Yang Haiping, a researcher at the Shanghai-based SIFL Institute.

With deposit rates under persistent downward pressure, some investors are actively seeking alternatives to traditional deposits, while bank-affiliated wealth management subsidiaries are continuously innovating products and improving services to enhance their appeal. The recent positive shifts in financial markets also present an opportunity to upgrade the wealth management product system, said Yang.

In 2024, financial regulators ordered corrections to practices such as the use of smoothing mechanisms in collaborations between trust companies and wealth management firms, as well as self-built valuation models by wealth management companies, setting the end of 2025 as the deadline for completion.

Analysts at Hwabao Securities noted that under the combined pressure of deepening valuation rectification and the low interest rate environment, wealth management companies have generally lowered performance benchmarks, suggesting that WMP yields may continue to face downward pressure in the medium to long term. Going forward, diversifying across multiple assets and strategies, strengthening investment research systems, and improving risk management will remain critical pathways for wealth management companies to break through.

Yang advised that bank-affiliated wealth management subsidiaries focus on three priorities to better meet investor demand for higher returns. He called for taking advantage of policy measures that support greater equity allocation, either by launching more equity-linked products or by raising equity weightings within "fixed income plus" and hybrid strategies. He also urged wealth management companies to enhance investor suitability management, strengthen research capabilities and broaden asset allocation. In addition, he suggested moderately extending product maturities to capture policy incentives and market opportunities, thereby improving yield performance.

Currently, fixed-income products remain overwhelmingly dominant in the WMP landscape. As of the end of June, outstanding fixed-income WMPs stood at 29.81 trillion yuan, accounting for 97.2 percent of the total — up 0.32 percentage point from a year earlier. Hybrid products accounted for 770 billion yuan, or 2.51 percent, while equity products and commodity and financial derivative products remained relatively small at 70 billion yuan and 20 billion yuan, respectively.

Recently, international gold prices have continued to rise. Riding on this wave of market enthusiasm, bank-affiliated wealth management subsidiaries have accelerated the issuance of gold-linked WMPs.

Data from a regulator-designated national banking WMP information inquiry website show that gold-linked WMPs issued by bank subsidiaries generally fall into two categories — fixed-income-based products with partial allocation to gold assets or structured WMPs linked to gold benchmarks, primarily investing in gold-related derivatives.

"Many wealth management companies are increasing their deployment of 'gold plus' products mainly to diversify asset allocation. Gold, as a safe-haven asset and inflation hedge, helps enrich investment portfolios, smooths out return volatility and provides stable returns. Moreover, investors are increasingly valuing gold's hedging and risk-offsetting functions, driving up demand for gold allocations," said Lou Feipeng, a researcher at Postal Savings Bank of China.

Lou expects more bank-affiliated wealth management subsidiaries to enter this segment and explore additional gold allocation strategies.

Facing long-term challenges from market volatility and shifting investor demand, wealth management companies must strengthen risk management and focus on low-volatility, stable approaches. Strategies such as equity-bond rotation and quantitative investing can help achieve absolute returns, Lou said.

jiangxueqing@chinadaily.com.cn