China Delays Financial Reforms for One Year, Coronavirus to Make it Two?

The coronavirus is going to delay things for China. The longer it delays economic activity, the greater the risk a delay can turn into a tipping point for indebted companies. There's also a risk the country moves backwards, but taking on more debt than necessary, should investors, business and/or speculators use this chance to load up on credit.

Caixin: 应对疫情防控 资管新规过渡期或延长一年

How long does the transition period last? According to Caixin reporters, due to the large size of the existing assets and the relatively long average remaining period, the supervisory department drafted a preliminary plan after consulting a number of large state-owned banks: For the remaining assets that are still difficult to dispose by the end of 2020, The disposal time may be extended to the end of 2021, and the transition period is about to be extended for another year (see Caixin Wuwen | Financial Personnel Affairs on February 4, 2020 " [WeNews] The new regulatory regime ’s transition period plan sends out signals when the epidemic is raging ").

　　However, it is worth noting that the one-year extension of the transition period was formulated before the epidemic occurred. In view of the unpredictable impact of the new crown pneumonia epidemic on the real economy, it is not ruled out that the extension of the transition period may be readjusted. As of press time, the CBRC has not yet responded to Caixin reporter's inquiry.

　　The transition period of the new asset management rules is prolonged in part because of the difficulties in the disposal of existing assets. According to Caixin reporters, preliminary statistics show that by the end of 2020, the remaining balance of bank wealth management assets is about 12.3 trillion yuan. Among them, non-standard assets are 3 trillion yuan, and the non-standard weighted average remaining period is 4.2 years; standardized assets are 9.3 trillion yuan, and the weighted average remaining period is 4.4 years. Among them, the six major banks, such as the establishment of diplomatic relations between the workers and peasants and the postal deposit, are expected to have a balance of 5.2 trillion yuan in wealth management assets at the end of 2020, accounting for 42% of the total balance of wealth management assets in all banks.

　　Among the existing wealth management assets, in addition to the non-standard assets that the market is concerned about, the difficulties in disposing of bank capital supplementary instruments invested in wealth management products are also more prominent. Some insiders told Caixin reporters that most of the banks' supplementary capital instruments (such as preferred stocks, perpetual bonds, and second-tier capital bonds) are held between banks. Among them, the proportion of bank wealth management accounts for nearly 60%. Such capital instruments have long maturities, poor liquidity, difficult valuations, and high concentration of investment in financial management. Banks believe that disposal is more difficult.

Summer 2018, Reuters: China may delay new rules for wealth management products: Caixin

December 2019, Caixin: Banks Set to Win Second Delay to Deadline for Asset Management Overhaul

Many commercial banks, faced with having to make significant changes to their asset management operations, baulked at the deadline and lobbied regulators to extend their grace period. Sources with knowledge of the matter have previously told Caixin that around July, the CBIRC held talks with large banks — including Industrial and Commercial Bank of China Ltd., Agricultural Bank of China Ltd., China Construction Bank Corp., Bank of China Ltd. and Postal Savings Bank of China Co. Ltd. — about their progress in implementing the cleanup demanded by the rules. The lenders requested another extension to the grace period for compliance of three to five years.