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Wealth management product from Evergrande property developer
16 Sep 2021 (184 views)  

The China developer Evergrande issued "wealth management products" which are purchased by their customers and employees.

I want to know the details of these products.

I suspect that they are like fixed deposits that promised a fixed rate of return on the maturity date.

It would probably be similar to the fixed deposits or term deposits issued by banks or the investment products issued by life insurance companies.

The problem is that the issuers of these products use the invested money to fund their operations. If their operations face difficulty, they cannot pay back the investment sum and the return on the maturity date.

In the case of the products from the banks or insurance companies, the regulator monitors the operations closely and make sure that the issuers are able to meet their obligations.

Here is an article from Bloomberg about the problem faced by Evergrande. It mentioned the following:

Evergrande has offered annualized interest rates of as much as about 13% on the products, higher than those typically sold at banks, and proceeds were to replenish working capital, according to the people. Some of the cash was invested in projects across China.


Tan Kin Lian
 


Wealth management product from Evergrande property developer
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The China developer Evergrande issued "wealth management products" which are purchased by their customers and employees.

I want to know the details of these products.

I suspect that they are like fixed deposits that promised a fixed rate of return on the maturity date.

It would probably be similar to the fixed deposits or term deposits issued by banks or the investment products issued by life insurance companies.

The problem is that the issuers of these products use the invested money to fund their operations. If their operations face difficulty, they cannot pay back the investment sum and the return on the maturity date.

In the case of the products from the banks or insurance companies, the regulator monitors the operations closely and make sure that the issuers are able to meet their obligations.

Here is an article from Bloomberg about the problem faced by Evergrande. It mentioned the following:

Evergrande has offered annualized interest rates of as much as about 13% on the products, higher than those typically sold at banks, and proceeds were to replenish working capital, according to the people. Some of the cash was invested in projects across China.


Tan Kin Lian