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China should straighten out its wealth managers, says central bank

Published on May 10, 2014 10:01 PM

BEIJING (REUTERS) - China should reorganise its wealth management industry as it is unduly raising funding costs and encouraging savers to behave like gamblers by chasing after lucrative short-term returns, a deputy governor of China's central bank said on Saturday.

In an unusually sharp criticism of the rapidly growing wealth management business, Mr Liu Shiyu said the sector has pushed up funding costs for Chinese companies, causing credit to be unpalatably expensive and distorting its economy.

"This type of practice where water is added at every layer and prices are raised in an exploitative way at every link directly increases costs in the real economy," Mr Liu told a forum on Saturday at Beijing's Tsinghua University.

"There is no contribution to labour productivity and it will lead a nation, it will lead a country's financial system into a short-term behaviour that is extreme in its gambling mentality."

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