Core Viewpoint - The article highlights a significant shift in the asset allocation of wealth management products in China's banking sector, indicating a trend towards more conservative investment strategies due to regulatory pressures and market conditions [2][4][6]. Asset Allocation Changes - The proportion of cash and bank deposits in wealth management products increased from 23.9% (approximately 7.68 trillion yuan) at the end of 2024 to 24.8% (approximately 8.18 trillion yuan) by mid-2025 [2]. - Conversely, the allocation to bonds decreased from 43.5% to 41.8%, with the balance dropping from 18.6 trillion yuan to 18.33 trillion yuan [3]. - Equity assets also saw a decline, with the balance falling from 0.83 trillion yuan (2.58%) at the end of last year to 0.78 trillion yuan (2.38%) by mid-year [3]. Investment Style - The investment style of wealth management funds has become increasingly conservative, reflecting a heightened sensitivity to net asset value fluctuations among clients [4][6]. - The trend of short-term funding sources for wealth management products has raised concerns among industry professionals, as new products are being launched with shorter durations and low-risk profiles remain dominant [7]. Regulatory Impact - Since 2024, various technical methods for stabilizing net asset values have been prohibited, forcing wealth management funds to revert to conservative asset allocations [8]. - The regulatory environment has led to a reliance on low-volatility assets, despite attempts to diversify into equities [8]. Liquidity Risk Management - The significant allocation to interbank deposits, while meeting low-volatility requirements, poses potential liquidity risks [9]. - Current regulations limit the investment in illiquid assets to 15% of the net asset value for open-ended public wealth management products, yet many products exceed this limit through indirect investment channels [10][11]. Industry Practices - Some wealth management firms are reportedly circumventing liquidity restrictions by channeling investments through trust or insurance products, which allows them to bypass direct investment limits [10][12]. - This practice raises concerns about the actual liquidity of assets held within these products, as a high proportion may be tied up in illiquid investments [11][13]. Conclusion - The article suggests that the wealth management industry is constrained by a "low volatility" mandate, which may hinder the transition to a more dynamic and transparent investment approach [12][13].