These are the 4 key drivers for China's rapid WMP market expansion

Bank-issued wealth management products have a four-year CAGR of 72%.

According to Barclays, wealth management products in China refer to investment products issued by banks or other financial institutions that repackage financial products (such as bonds,  money market products, equities, trust products) and are sold to retail and corporate customers.

The WMP issuer acts as the authorized fund manager of the money raised from  sales of WMPs. Investment risks and returns that are shared between investors and issuers  are stated in the product sales agreement or contract.

Here's more from Barclays:

The total outstanding amount of bank-issued WMPs grew dramatically, going from RMB820bn as of end-2008 to RMB7.1tn at end-2012 (equivalent to more than 7% of total  system deposits), representing a four-year CAGR of 72%.

The significant amount is now compared to the trust sector total assets under management (AUM) of RMB7.5tn at end-2012, and total asset of insurance companies of RMB7.4tn at end-2012.

We believe the key drivers for rapid WMP market expansion include:

•  Growing demand from investors, as they look for low-risk investment products with yields that are higher than time deposit rates amid the low/negative real interest=rate environment. Comparing the weighted average return of 4.1% from bank-issued WMPs in 2012 to the upper limit 1.1x benchmark 1-year time deposit rate of 3% (ie, 3.3%).

• Strong financing demand from property developers, small- and medium-sized enterprises (SMEs) and local government financing vehicles (LGFVs). 

• Intensifying deposit competition and funding needs for banks’ off-balance sheet lending under the tight loan quota and loan-to-deposit ratio requirement of 75%.

• Fee income earned on WM business, more intention by banks to grow the business, in an effort to diversify their non-interest income revenue streams.