Wealth Products Threaten China Banks on Ponzi-Scheme Risk

Zhang Defa hurried into an Industrial & Commercial Bank of China Ltd. branch in Shanghai on a sizzling July afternoon breathlessly looking for the manager.

The day before, Zhang had received a text message saying the bank was selling a 37-day wealth-management product with a 5 percent expected annualized return, principal guaranteed. He was too late. The offer, requiring a minimum of 500,000 yuan ($81,000), had sold out in less than three hours. Zhang would have netted 2,534 yuan in just five weeks.