1. Wealth management is the most important business innovation ever made by Chinese commercial banks. Recent years have witnessed a vigorous development of new businesses of Chinese commercial banks. They include e-banking, bankcard, derivative product and asset securitization. Of all these new businesses, wealth management is undoubtedly the most important innovation. While Chinese commercial banks have developed their wealth management business by learning from their foreign counterparts, their foreign counterparts have also provided a great deal for the Chinese banks to learn and draw on in wealth management.

　　2. Foreign banks have experienced three stages in wealth management. Modern wealth management first appeared in the United States and has since experienced roughly three stages. The first stage lasted from the 1930s to the 1960s. This was a period of beginning, or a stage of “recommended sales”. For example, an insurance company might sell life insurance products on the basis of customer analysis. The second stage lasted from the 1960s to 1980s. It was a period of development, or a period of “package service”. For example, a commercial bank might integrate deposit, fund and insurance products with different risk characteristics and sell them to customers. The third stage ranges from the 1990s to present. It is a period of maturity or a period of “tailored service”. For example, a commercial bank may provide a customer with a comprehensive personalized financial service covering stock, bond, trust, fund and derivative products according to the risk tolerance and risk preference of the customer.

　　3. China Everbright Bank has designed the name of wealth management. Wealth management has no unified name in the world. The countries in Europe and America call it financial planning service or asset management service, while Hong Kong and Taiwan generally call it wealth management service. We call it wealth management (理财业务), mainly because when China Everbright Bank applied to the China Banking Regulatory Commission in 2004 for becoming the first bank in China to offer this service. At that time, I was on the commission, in charge of this work, and I selected this name after consideration. I think our name is more scientific. The Chinese character 理(li) here can be used as an adverb to indicate that wealth is managed with rationality. That means that wealth should be managed with rationality and risks should be prevented with rationality. Therefore, we call it 理财业务（licai yewu, meaning managing wealth with rationality）.

　　4. The essential feature of wealth management is personalization, combination and integration. Modern wealth management is an integrated and personalized mode of service, which combines customer management, financial planning, fund management and portfolio management on the basis of market sub-division by commercial banks and in accordance with the financial service demands of different customers or customer groups. The essential feature is personalization, combination and integration. In other words, the mode of banking service and the mode of banking operation are integrated through the combination and innovation of diverse financial tools and diverse modes of transaction in light of the personalized financial demands of specific customer groups.

　　5. Wealth management of China’s commercial banks has been developing rapidly and playing tangible roles.

Since Everbright Bank introduced the product of Renminbi wealth management in 2004, wealth management by Chinese commercial banks has scored substantial breakthroughs. The issuance of personal wealth management products by Chinese banks totaled RMB 200 billion in 2005 and rose to RMB 400 billion in 2006. In the first half of 2007, the personal wealth management products issued by 24 leading Chinese and foreign banks rose further to RMB 388.6 billion. For the whole year, the wealth management products issued by commercial banks are expected to near RMB 1,000 billion. At a time when China’s banking industry is completely opening up, the stock market is warming up and the non-banking financial institutions are actively involved in innovation, wealth management increased the competitiveness of the Chinese banks, stabilized their basic customer groups and quickened the pace of banking innovation and integrated operation. Wealth management has become an important tool for commercial banks to adjust their development strategies.

　　6. Wealth management of China’s commercial banks has “four linking” functions.

　　First, wealth management links up investment with financing. Banks are intermediary institutions for financing, while wealth management is a behavior of direct investment. The wealth management offered by banks links up investment with financing, thus improving the business structure of the banks and easing their financial risks.

　　Second, wealth management links up the diverse demands of the customers with the innovation impulse of the banks. While the rapid swelling of the personal wealth of the Chinese residents has raised more and higher demands for financial services both in depth and breadth, the banks themselves also have an inherent impulse for financial innovation in order to realize strategic transformation. Wealth management can combine the two effectively to meet the demands of both sides.

　　Third, wealth management links up the restructuring of the whole internal processes of the banks and forced the banks to establish a customer-centered organizational system so as to comprehensively build up their capacities for investment transactions, marketing and promotion, customer relations management and market subdivision. In particular, wealth management constitutes a test to the risk management capacity of the banks. The ultimate goal of the risk management of wealth management is not to and cannot fundamentally eliminate risks, but to identify, measure and control risks. As competition intensifies and deepens, banking profit comes more from their risk management capacity. The ultimate path for commercial banks to develop wealth management is to develop their own risk pricing models and exercise intensive and dynamic management over market risks. By so doing, they will move from passive price accepters to active market participants and eventually to market makers and risk bearers.

Fourth, wealth management links up the macro-financial policies with the micro-banking players. For example, the introduction of the QDII, through-train to Hong Kong stock market and other wealth management services have not only profoundly changed the development path of the banks themselves but also produced positive impacts on the effectiveness of the country’s financial and monetary policies.

　　7. The position of Everbright Bank’s wealth management in China’s banking industry.

　　Since 2004, Everbright Bank has constantly innovated its products and businesses and scored certain advantage in the field of wealth management. The scale of its personal wealth management products totaled RMB 150 billion. In 2006, the issuance of its Renminbi wealth management products accounted for 21 percent of the market, thus becoming the largest issuing bank of Renminbi wealth management products. Besides, the bank has been rated first for three years running by the Internet users of the wealth management products websites such as Sina, Sohu and Hexun.

　　8. Everbright Bank has won 10 firsts in wealth management.

　　Everbright has won 10 firsts in product innovation. In 2004, the bank used the technique of bond asset securitization and developed the sunshine B plan for wealth management, which was the first Renminbi wealth management product ever offered by a Chinese bank. In April 2005, the bank developed the sunshine A+ plan for wealth management, which was the first Renminbi structuralized wealth management product. In December 2005, the bank used the principle of credit breach of contract exchange and developed the sunshine C plan for wealth management, which was the first Renminbi credit-linked wealth management product and thus explored a way to transform credit risk from inside the bank to the market. In 2006, the bank took advantage of the double-layer trust system and developed the sunshine T plan for wealth management, which was the first trust-integrated wealth management product and realized the integration of wealth management funds with the trust and stock markets. In August 2007, the bank developed the first insurance-included wealth management product, which represented a new approach to banking-insurance cooperation. In September 2007, the bank developed the first structuralized wealth management product embedded with A-stock options, which became a new tool for investing in domestic stock markets. Improving wealth management processes and risk management, the bank became the first to entrust wealth management investment in 2005, thus strictly separating the bank’s agent business from its own business. In October 2006, the bank was the first to introduce both internal risk rating and external credit rating for wealth management products, thus making the risk disclosure of wealth management products more transparent. In November 2006, the bank was the first to introduce inter-bank agent sales for wealth management products, thus promoting the common development of national and regional banks. In 2007, the bank was the first to develop a registration system for bank wealth management, thus fundizing the issuance of bank wealth management products.

　　9. Wealth management has made six contributions to Everbright Bank.

　　One, it has contributed customer resources. Wealth management nurtured and stabilized the retail customer group for Everbright Bank. Currently, the number of the bank’s middle and high-end personal customers is three-fold higher than at the end of 2004. Two, it has contributed the income from intermediary businesses. In the first three quarters of 2007, the management commission realized by wealth management business became the second largest income source from intermediary businesses of the bank. Three, it has contributed brands. The “sunshine wealth management” has become an important business brand and has been widely recognized by investors. Four, it has contributed cash flow. The effective liabilities formed by wealth management products accounted for 38 percent of the bank’s personal deposits. Five, it has contributed teams and morale. The development of wealth management over the past three years has helped the bank’s personnel on the front, middle and rear lines to deepen their understanding of wealth management, including product development, marketing, accounting, IT support and risk management, and produced lots of professional teams for wealth management. Lastly and also most importantly, wealth management has contributed space for further innovation and integrated operation. If we say the exploratory work in wealth management begun by the bank in 2004 was only a move without an ambitious goal, today the bank has defined wealth management as a business of strategic importance and as a core innovative product and an important strategic option. The bank has decided to further consolidate its leading market position, strengthen risk management and brand contributions, and transit from single-product innovation to serial-product innovation. The bank will use comprehensive innovation, which focuses on wealth management and covers product, service, management, expertise, organization, system, concept and culture, to help its own business transformation and turn itself from a medium-size commercial bank to an omnipotent bank with certain business uniqueness. In addition, it will make use of its comparative advantage in asset management, investment banking, financial derivative transaction and other new businesses and break through the existing pattern of competition so as to win greater space for self development in a growingly complex financial climate.

　　10. The prospect of wealth management of Chinese commercial banks.

　　With the diversification and innovation of financial tools, wealth management has evolved from a simple business to a complex one, from a primary business to a derivative one and from a single-market operation to a multiple-market one. Its design has also incorporated the development of national and foreign currency derivative products, the collective transactions of bonds, the expansion of direct financing channels, the free conversion of capital accounts, the securitization of assets, the expertise of dynamic value preservation, and the allocation of assets. Given the important positions of the banks in China’s financial system and the diversity of the investors, wealth management has become an important channel for commercial banks to pursue financial innovation and integrated operation.

　　China is a country with a large population. As its personal income continues to rise, wealth management will have an enormous space for development. Proceeding from wealth management, Chinese commercial banks will usher in lots of new business areas such as investment banking, asset management, financial derivative trading and personal banking. The Chinese banks have a glorious mission ahead!