Inflation is the driving force for China’s Structured Product market

My wife and I recently visited Shanghai.  Walking through IFC Shanghai we can’t help but noticed that the prices has gone up dramatically when we were there not too long ago.

Inflation is one of the biggest problems people in China are facing, and with interest rate still relatively low, the need to fight off such high inflation is the driving China’s structured products market.

Structured deposits that linked to commodities, interest rates, exchanges, equity, with principal protection features are being promoted by banks and wealth managers as a weapon against high inflation. 

Commodities-linked products are especially popular.  According to “China Investment Online”, an online financial publication, eight banks have issued 26 different types of commodity-linked financial products in 2011. 

But experts are now cautioning investors that although these structured deposits may provide anti-inflationary effect, they must be clear as to the terms and conditions that come with these products, especially when such investments might lock their money in for a while. 

Of the 26 products, only two allow the investor to redeem their investment payoffs each month, and that’s after a three month holding period.

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