China Everbright Bank launched its education-based wealth management products over the weekend, the first such products promoted by a domestic bank to meet the educational investment needs of Chinese households.

The new services, named "Plan E" (E for education), are made up of three types of products based upon different wealth management demands to cover future educational expenses, with parallel education consulting services, lectures and financing arrangements, bank sources said.

The move further expands the product line of the bank's renminbi and foreign exchange wealth management products that were made available a few months ago and adds to the already heated competition in the retail banking business among local banks.

"The features of Plan E are stable yields and a comparatively long term of investment," said Liu Jun, deputy general manager of the treasury department of China Everbright Bank.

One of the products, for example, is a four-and-a-half year renminbi wealth management project that is specially designed to cover educational expenses. With a minimum purchase of 10,000 yuan (US$1,208), the project will use money raised to invest in bonds with sovereign credit, which has a very stable yield that is expected to remain higher than the bank deposit interest rate, according to Liu.

The other two products, both sold and operated in foreign exchanges, are aimed at households that plan to send their children to study abroad.

One of the foreign exchange products is specially designed for families that have US dollar assets but are planning to send their children to study in countries where the US dollar is not the main currency.

With the use of currency investment tools and financial derivatives in overseas markets, like swap and option, which are not always accessible to retailers, the service is expected to help customers minimize foreign exchange exposure brought by the fluctuation of foreign exchange rates between the US dollar and other foreign currencies.

However, a major problem with the marketing of these new wealth management products by the banks is how to put the sophisticated financial terms into simple and acceptable expressions that customers can understand, experts said.

Normally, an ordinary customer bases any decisions regarding such products on three factors: Whether it caters to his/her special needs, whether he/she can understand and accept it, and whether the seller has good credit, said Yuan Yue, chairman of Horizon Group, a Chinese consulting company.

The demand for professional wealth management services is growing rapidly in China, as the personal wealth of the Chinese people increases, but the challenge for banks is how to categorize their target customers and understand their needs, Yuan said.

Education is a major investment sector for many families in China, so its market potential is large, but banks have to make their services really advantageous and useful, he said.

Apart from selling the products, parallel services like educational consulting and assistance in other relevant financial matters, for example, may help the bank win more customers.

Another major concern for the public and regulators alike are the yields promised by banks of such investment projects.

The central bank has recently reiterated that no exaggeration of returns should be made during the selling of these banking products and the customers should be informed of all potential risks.

(China Daily January 17, 2005)