Chen Guowang: The timing for expanding the wealth management company is ripe. It is recommended to approve one company and proceed cautiously with another.

How Can the Optimization and Integration of Small and Medium Banks Assist in Expanding the Wealth Management Market?

Currently, China’s banking wealth management industry has entered a new phase of standardized development, and the expansion of wealth management companies has become a focal point in the industry. Chen Guo Wang, director of the Banking Research Institute of the Financial Sector, recently stated that the timing for expanding wealth management companies in China is now mature, supported by multiple factors such as regulatory systems, industry practices, market environments, and international references, and he suggests advancing steadily with the principle of “mature one, approve one.”

Chen Guo Wang pointed out that the regulatory system for the wealth management industry has formed a complete closed loop. After the implementation of the new asset management regulations, supporting rules for the supervision of wealth management companies, net capital, liquidity management, and others have been successively introduced. Recently, the regulatory rating method for wealth management companies has officially been implemented, and the overall framework for institutional access, daily supervision, risk disposal, and other processes has basically taken shape, providing clear compliance guidance for newly established wealth management companies.

In addition to comprehensive institutional guarantees, the operational practices of existing wealth management companies have also provided mature experiences that can be directly replicated for industry expansion. By the end of 2025, the 32 domestic wealth management companies that have opened for business will manage a scale of 30.7 trillion yuan, accounting for 92.25% of the overall wealth management market. The types of institutions include state-owned banks, joint-stock banks, urban commercial banks, rural commercial banks, and joint venture wealth management companies. Director Chen Guo Wang pointed out that these institutions have already explored a mature operational closed loop in aspects such as investment research systems, risk control, product development, marketing, and financial technology empowerment, and the relevant experiences can be directly replicated and promoted to newly approved institutions, effectively reducing the operational trial-and-error costs for new establishments.

From the perspective of the overall industry environment, the normalization of small and medium banks reducing quantity while improving quality has also cleared key obstacles for the expansion of wealth management companies. Director Chen Guo Wang analyzed that after several years of concentrated risk disposal, the number of high-risk institutions among small and medium banks and their corresponding asset scale have been significantly reduced, with multiple provinces achieving zero high-risk institutions, creating a stable financial market environment for the establishment of new wealth management companies.

At the same time, the integration of the small and medium banking industry is continuously advancing, with hundreds of institutions completing optimization through mergers and reorganizations or market exits, resulting in a group of quality small and medium banks with good governance structures and ample development potential emerging. During the 14th Five-Year Plan period, the optimization and integration of small and medium banks will continue to proceed as normal, further solidifying the institutional foundation for the expansion of wealth management companies.

Looking at the global financial market, the asset management business experiences from mature overseas markets also provide a clear reference path for the expansion of wealth management companies in China. The core advantages of licensed operations further confirm the feasibility of expansion. Director Chen Guo Wang mentioned that referring to the asset management practices of small and medium banks in the United States, Japan, and Europe, licensing is an inevitable trend in industry development. Data shows that the deposit loss rate of licensed small and medium banks in Europe and the United States is only 3%-4%, while the deposit loss rate of unlicensed institutions in Japan reaches as high as 12%. In China, the deposit loss rate of unlicensed banks is about 8%, while licensed institutions can control this rate to around 3%, significantly stabilizing liabilities and controlling liquidity. Meanwhile, the contribution of revenue from the asset management business of international licensed banking financial institutions generally accounts for 25%-40%, becoming the second growth curve for bank profits. This experience provides direction for small and medium banks in China to increase the proportion of non-interest income against the backdrop of narrowing interest margins.

“Steadily advancing the expansion of wealth management companies has multiple positive implications,” Director Chen Guo Wang believes. For the industry, expansion can increase market supply, enrich the types of wealth management products, and help build a multi-level wealth management market that better meets residents’ diverse wealth management needs; for small and medium banks, establishing wealth management companies is an important lever for managing liquidity, stabilizing core liabilities, and enhancing the proportion of intermediate business income, helping to solve the challenges of transformation and development; for consumers, more licensed institutions entering the market can provide residents with more wealth management choices and higher quality financial services, while also improving rights protection; for industry regulation, expansion further promotes the licensing and standardization of wealth management business development, perfecting the overall wealth management market system and achieving controllable industry risks.

Regarding the practical paths for expansion, Chen Guo Wang suggests adhering to the principle of “mature one, approve one,” prioritizing support for quality small and medium banks with good qualifications and sound risk control to establish new entities. Newly established institutions should leverage regional advantages, focus on inclusive finance, elderly care, and other specialty areas, and avoid homogeneous competition. Regulators can provide moderate tolerance and policy support for newly established entities, encouraging innovative pilot projects.

“In terms of establishment forms, flexibility and diversity can be encouraged, supporting single banks to initiate, while also encouraging urban commercial banks and rural commercial banks to collaborate across regions. At the same time, allowing the introduction of strategic investors with asset management experience or industrial resources can help fill professional capability gaps, promoting the formation of a pattern of differentiated competition and collaborative development in the industry.”

Chen Guo Wang emphasized that the expansion of wealth management companies is timely and conditions are in place. Advancing the expansion in a steady and orderly manner will assist small and medium banks in achieving high-quality transformation, better meeting residents’ wealth management needs, perfecting the wealth management market system, and providing support for the long-term stable operation of the financial industry and high-quality economic development.