Chinese Investors Are Discovering the Joys of Structured Products

The good old days are back. In China, anyway:

Structured deposits offer higher returns than regular savings accounts and are tied to bets on assets from currencies to gold. They have been around for years, but the sums outstanding have soared recently. In July they stood at a record 9.71 trillion yuan ($1.42 trillion), up 52% in a year, according to data provider Wind.

….The investments are a form of structured product. In the U.S., this broader asset class enjoyed solid growth until the global financial crisis, when products issued by Lehman Brothers suffered steep losses. In 2013, the Securities and Exchange Commission introduced stricter disclosure requirements for structured notes, bonds that contain a derivative component.

….However, many of these structured deposits in China have structures where the terms are “set so far off that investors can almost always get the advertised maximum return,” says Ms. Wan at Moody’s. In a 91-day product recently marketed by Weihai Blue Ocean Bank, the small lender from eastern Shandong province offered the equivalent of 5.28% a year if gold prices in London, now around $1,183 per ounce, stay between $300 and $2,200. If not, customers will receive 1.65%.

What could go wrong?

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SIX TRUTHS

Reclaiming power from those who abuse it often starts with telling the truth. And in "This Is How Authoritarians Get Defeated," MoJo's Monika Bauerlein unpacks six truths to remember during the homestretch of an election where democracy, truth, and decency are on the line.

Truth #1: The chaos is the point.

Truth #2: Team Reality is bigger than it seems.

Truth #3: Facebook owns this.

Truth #4: When we go to work, we're in the fight.

Truth #5: It's about minority rule.

Truth #6: The only thing that can save us is…us.

Please take a moment to see how all these truths add up, because what happens in the weeks and months ahead will reverberate for at least a generation and we better be prepared.

And if you think journalism like Mother Jones'—that calls it like it is, that will never acquiesce to power, that looks where others don't—can help guide us through this historic, high-stakes moment, and you're able to right now, please help us reach our $350,000 goal by October 31 with a donation today. It's all hands on deck for democracy.

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