China slows wealth management product issuance amid tightened regulation: report

The outstanding balance of WMPs issued or distributed by banks reached 30 trillion yuan (about $4.4 trillion) as of April 2017, indicating 16.4-percent year-on-year growth, slower than the 23.6 percent in 2016 and 56.5 percent in 2015, according to a report by Moody's Investors Service.

China's fast-expanding wealth management industry has been considered a source of financial risk, as off-balance-sheet WMPs channel deposits into risky investments without enough regulation.

As part of the country's deleveraging efforts, the banking regulator, the China Banking Regulatory Commission, has strengthened supervision of WMPs this year, requiring lenders to clearly disclose risks to investors while prohibiting them from using their own funds to invest in WMPs they themselves have issued.

Enhanced regulatory policy measures and guidelines should further constrain the growth of off-balance-sheet WMPs, which has been one of the fastest-growing components of the shadow banking sector, said Moody's in the report.

"This is credit positive as it would gradually dampen banks' incentive to engage in regulatory arbitrage, and reduce the risks in the shadow banking sector," it said.