As regulators pursued deleveraging in 2017, retail investors on Internet platforms drove rapid growth in money market funds (MMFs). The funds became attractive to yield-hungry investors as an alternative to wealth management products (WMPs), bonds, and equities. Now Chinese regulators seem to be concerned about their growth. Retail investment growth in MMFs will continue but some marginal liquidity will likely be drawn back to WMPs or to equity markets. Additional regulations targeting overconcentration, leverage, and credit risks will likely raise funding costs for smaller banks.
