Chinese Investors Are Discovering the Joys of Structured Products

The good old days are back. In China, anyway:

Structured deposits offer higher returns than regular savings accounts and are tied to bets on assets from currencies to gold. They have been around for years, but the sums outstanding have soared recently. In July they stood at a record 9.71 trillion yuan ($1.42 trillion), up 52% in a year, according to data provider Wind.

….The investments are a form of structured product. In the U.S., this broader asset class enjoyed solid growth until the global financial crisis, when products issued by Lehman Brothers suffered steep losses. In 2013, the Securities and Exchange Commission introduced stricter disclosure requirements for structured notes, bonds that contain a derivative component.

….However, many of these structured deposits in China have structures where the terms are “set so far off that investors can almost always get the advertised maximum return,” says Ms. Wan at Moody’s. In a 91-day product recently marketed by Weihai Blue Ocean Bank, the small lender from eastern Shandong province offered the equivalent of 5.28% a year if gold prices in London, now around $1,183 per ounce, stay between $300 and $2,200. If not, customers will receive 1.65%.

What could go wrong?

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DEMOCRACY DOES NOT EXIST...

without free and fair elections, a vigorous free press, and engaged citizens to reclaim power from those who abuse it.

In this election year unlike any other—against a backdrop of a pandemic, an economic crisis, racial reckoning, and so much daily bluster—Mother Jones' journalism is driven by one simple question: Will America move closer to, or further from, justice and equity in the years to come?

If you're able to, please join us in this mission with a donation today. Our reporting right now is focused on voting rights and election security, corruption, disinformation, racial and gender equity, and the climate crisis. We can’t do it without the support of readers like you, and we need to give it everything we've got between now and November. Thank you.

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