Over 6,100 Chinese Wealth Products Overhaul Benchmarks Under New Disclosure Rules

A sweeping change in China's financial disclosure regulations has prompted a massive overhaul of how bank-issued wealth management products (WMPs) report their performance targets. In the first week since the new rules took effect on September 1, more than 6,100 products have adjusted their performance benchmarks in a move aimed at increasing transparency and preventing firms from using them as a marketing tool.

A Shift from Fixed Rates to Formulas

The new "Information Disclosure Management Measures for Asset Management Products" have spurred a widespread shift away from fixed numerical ranges for performance benchmarks. According to data compiled by Wind, approximately 6,100 WMPs have announced benchmark adjustments since August 1, exceeding the total number of such changes in the first seven months of the year.

Many asset managers are replacing simple annualized rate targets, such as "2% to 3%," with complex, formula-based benchmarks. These new formulas typically tie performance to a weighted average of market indices, such as bond and stock indexes. For example, Shanghai Pudong Development Bank's wealth management arm adjusted its "Tianfuying" series to a benchmark composed of 90% of a bond index yield, 3% of the CSI 300 stock index yield, and 7% of the demand deposit rate.

However, a significant number of products have retained numerical benchmarks, instead opting to lower their target ranges or switch to a specific single rate. This coexistence of formula-based and numerical benchmarks is expected to continue during a transitional period as firms adapt to the new system, according to Wang Pengbo, chief analyst at Botong Consulting.

Curbing Misleading 'Implied Guarantees'

Analysts say the regulatory overhaul is designed to address long-standing issues where performance benchmarks were used to mislead investors. Zhaolian Chief Researcher Dong Ximiao told Times Weekly the goal is to transform benchmarks from a manipulable "marketing tool" into an objective evaluation standard.

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"Previously, when market interest rates declined or a product performed poorly, some institutions would lower the performance benchmark to 'beautify' their achievement rate," Dong said. He noted this practice could obscure real investment risks and mislead investor decisions.

The new rules emphasize that benchmarks must remain consistent and cannot be adjusted arbitrarily. The change is intended to weaken the "implied guarantee" of returns that fixed targets often suggested to retail investors.

Persistent Focus on Inflated Historical Returns

Despite the changes, many bank apps continue to prominently display a product's "annualized return since inception," a metric that can be significantly higher than recent performance. The new, more complex formula-based benchmarks are often relegated to less visible sections of the product description.

For instance, one product from Minsheng Wealth Management, "Fuzhu Pure Debt 369-Day Holding Period No. 6," displays a since-inception annualized return of 4.98%. However, its annualized returns over the past one, three, and six months were 2.74%, 1.25%, and 2.34%, respectively. Analysts note this highlights a key issue the new regulations seek to correct, as historical data is not indicative of future performance.

Interviews with investors cited by Times Weekly (under pseudonyms) indicate that many still focus on these high-level historical return figures and pay little attention to the underlying benchmark or assets. The new rules do mandate that products must display a disclaimer stating that the benchmark is not an expected return and does not constitute a promise of earnings.