China's smaller commercial banks are busy launching renminbi-based personal wealth management programmes, hoping the service will become a new way to attract private deposits and enhance profits.

The China Minsheng Banking Corp is scheduled to sell its yuan-based personal wealth management plans beginning tomorrow. The China Everbright Bank started similar programme in September. The CITIC Industrial Bank and China Merchants Bank are said to have submitted applications to the banking watchdog, the China Banking Regulatory Commission (CBRC), to operate a similar programme.

Insiders said that after seeing successful operations at smaller banks, the CBRC will allow big State-owned banks to make inroads in the same sector.

"I think they (the State banks) will join us soon," said Hong Qi, vice-president of Minsheng Bank.

China's outstanding personal deposits stood at 11 trillion yuan (US$1.3 trillion) at the end of last year. Experts estimate that China's personal wealth management market will grow by 40 per cent in the next 10 years.

Currently, the most important feature of the money management programmes is the ability for participants to invest partly in financial instruments to which only financial institutions now have access.

These instruments include certain types of treasury bonds, debentures and bills issued by the central bank. They generate higher yields than deposits in typical bank savings accounts.

Minsheng will offer a set 2.84 per cent annual interest rate to its customers that invest between 10,000 and 100,000 yuan (US$1,200-US$12,000) into a one-year plan. That is compared to 2.25 per cent for year-long deposits.

Minsheng officials said they offer only six-month and one-year plans. A major reason for not providing longer terms is that lots of people expect the central bank to raise benchmark interest rates again after last month's rate hike.

But the anticipated interest rate change should not have that big an impact on customers' decisions on whether to enter the personal wealth programmes.

(China Daily November 16, 2004)