Mr. Sun never imagined he would end up protesting outside local government offices in Wuhan, the capital city of Hubei Province, after he put his money in the largest financial management company in central China. But after the firm, Wuhan Wealth Cornerstone Investment Management (Wuhan Caifu Jishi), announced a default on Nov. 24, thousands took to the streets in protest.
The firm was defaulting on a “wealth management product” (WMP), a high-yield financial instrument, after a project the capital was invested in ran short of funds. The product had collected about 5 billion yuan ($782 million) from over 70,000 investors, according to one of the investors speaking to China Business Journal.
WMPs, as they’re called, are attractive because they offer returns markedly higher than the 3 percent maximum rates that state banks give for deposits. Certain products offer annual interest rates of 5 percent, or even promise short-term returns of over 10 percent.
