Dr. Zhou Yuanfan, Chief Economist of Anrong Rating, Interviewed by China Securities Journal

Recently, a reporter from China Securities Journal interviewed Dr. Zhou Yuanfan, Chief Economist of Anrong Rating. The interview results were published on March 18 in the newspaper, as well as on its official website and WeChat public account, under the title “‘Wealth Management’s Selective Appetite’ for Non-Standard Assets: High Returns Cannot Conceal Hidden Concerns Over ‘Excessive’ Proportions.”

In this interview, at the reporter’s request, Dr Zhou Yuanfan sorted out the advantages and risks of non-standard assets and analysed the core drivers behind wealth management products’ preference for such assets. The Measures for the Administration of Wealth Management Subsidiaries of Commercial Banks, released on December 2, 2018, stipulate that, at any point in time, the balance of all wealth management products invested in non-standard debt-type assets by a bank wealth management company must not exceed 35% of the net assets of the wealth management products. However, the proportion of non-standard assets allocated in some wealth management products has already exceeded this limit. In response, Dr. Zhou Yuanfan noted that the reason wealth management products favor non-standard assets—and even break through conventional proportion limits in some products—lies in the three unique advantages of non-standard assets: “high returns, low volatility, and easy matching,” which make them a “hot favorite” for wealth management fund allocation in the current complex market environment. Regarding the reasons wealth management products prefer non-standard assets, he systematically explained, from three perspectives—a “profit cow” in pursuit of high returns, a “ballast stone” to smooth net asset value fluctuations, and a “regulating valve” that provides asset-liability matching—the mechanism by which the “tailor-made” flexibility of non-standard assets aligns with the management needs of wealth management product managers.

In addition, Dr Zhou Yuanfan believes that while allocating a large proportion to non-standard assets can boost returns in the short term, the liquidity risk, credit risk, and operational compliance risk hidden behind it must not be ignored, and as regulation tightens, these risks are being exposed at an accelerating pace. Therefore, drawing on the negative consequences in recent years of wealth management products allocating a large proportion to non-standard assets, he offered in-depth reflections on the regulatory development of non-standard assets. He stated that efforts should be made to actively promote the standardised transformation of non-standard assets, encouraging eligible non-standard assets to be converted into standardised assets through asset securitisation (ABS) and other means, improving liquidity and pricing transparency, and fundamentally optimising the asset structure. Addressing the risks of non-standard assets, from the perspective of coordinated governance on both the institutional and investor sides, Dr Zhou Yuanfan put forward practical response suggestions such as strengthening look-through management and information disclosure, actively advancing the “non-standard to standard” transition and asset securitisation, and establishing dynamic risk early-warning mechanisms.

China Securities Journal is a national daily newspaper specialising in securities and is sponsored by Xinhua News Agency. As a designated information disclosure media outlet of the China Securities Regulatory Commission (CSRC) and the China Banking and Insurance Regulatory Commission (CBIRC), the newspaper focuses on securities and financial reporting, covering areas including macroeconomics, listed companies, and currencies and funds, and is committed to promoting the Party and the state’s economic and financial policies, popularizing financial knowledge, and providing investment references.

This interview not only showcased Anrong Rating’s professional strength in the field of financial product risk assessment but also further consolidated the positive communication and cooperative relationship between the company and media organisations. Anrong Rating will continue to uphold the principles of professionalism, objectivity, and independence, and remain committed to providing the market with high-quality credit rating services and in-depth industry research, contributing to the healthy and stable development of China’s bond market.