Chinese banks' wealth-management products (WMP) have reported their slowest growth in three years, as financial regulators step up measures to rein in the ballooning sector.

An official report shows that the value of the banking sector's WMPs reached 29 trillion yuan (nearly 4.2 trillion US dollars) by the end of 2016, up 23.6 percent from a year earlier. That was less than half the average growth of 49.1 percent per year for the previous three years. 

Unlike the value of WMPs for individual investors, however, the value of inter-bank WMPs nearly doubled to 5.99 trillion yuan (0.9 trillion US dollars) last year. An industry insider said there were several reasons behind the figures, and that the fast expansion of inter-bank WMPs was not likely to continue this year. 

“The issuance of WMPs by China's banks began to slow in 2014. And since the fourth quarter of last year, the central bank has begun pursuing a macro-prudential assessment of the banking system, especially of inter-bank WMPs to avoid financial risks such as cross-holdings, over-leveraging and arbitraging. Things have improved a lot since then,” said Zhou Kunping, the deputy general manager of the research and development department at the Bank of Communications. 

On the other hand, WMPs still remain a big attraction for individual investors, like Feng Wei in Shanghai. He said that last year, he spent some 70 percent of his money allocated for investment in the property market, and only ten percent on banks' wealth-management products. But amid tighter regulations in the real estate market in the latter half of 2016 and a poorly performing stock market, Feng has decided to increase his investment in bank WMPs to 30 percent this year. 

“WMPs offered by banks have much lower risks, so I think my money will be safe there. In the current economic environment I'd like to buy more bank WMPs. Several times this year I've encountered a situation in which many good WMPs with high yields sold out very quickly after they were issued. I think this shows the demand is very resilient. But as a consumer, I'd like to wait for the best rather than make do with the less profitable ones,” Feng told CGTN. 

Zhou estimates that demand for bank WMPs from individual investors will grow this year, offsetting the decline in inter-bank WMPs, and leading to a stable market for 2017.