Risk Abounds with Huge Growth in China’s Money Funds

China’s asset management industry has had explosive growth in the last two years following the arrival of online money market funds, which have transformed the way millions of Chinese invest their savings.

The booming popularity of money funds, however, has led several investment experts to raise serious concerns about risks developing in the industry as a result.

The funds’ appeal is strong given that most of them offer annual returns of 4-6 percent, compared with the 3 percent Chinese individuals receive on their bank deposits. The returns have helped money market funds’ assets under management grow nearly 15-fold in the past four years to 1.9 trillion yuan ($306 billion) at the end of 2014, according to Goldman Sachs Asset Management.