Recent moves by the Chinese authorities to crack down on potentially risky wealth management products has cut the number of new products and their yields, Xinhua has reported.

Chinese banks and financial institutions in April issued 2,439 wealth management products, a kind of high-interest deposits, a 12.8 per cent drop from the level in March, the news service said, citing Bankrate.com.cn.

In the first week of May, 35 Chinese banks issued 282 products, as compared with more than 400 products sold in the previous week, it said. Average yields of products with a term of shorter than one month have fallen 28 basis points to 3.58 per cent in the week ending May 11, from the last week of March, during which the latest tightening measures were launched.

Wealth management products in China have prospered due to a relative dearth of alternative routes for investing money and relatively strong yields.

A few days ago, Moody’s Investor Service said that China’s recent efforts to tighten controls on wealth management products, part of what is called the country’s “shadow banking market”, are positive for banks’ credit ratings, although this issue will continue to affect banks’ credit profiles. Moody’s estimates that core Chinese shadow banking products - those that are relatively non-transparent, loosely regulated, and carry elevated credit risk - stood at at total of RMB21 trillion ($3.41 trillion) at end-2012, or 39 per cent of 2012 gross domestic product.

The report is the latest commentary about such products in recent months; they have raised fears that the world’s second largest economy has a banking system vulnerable to investor hunger for yield. Some reports have even likened these wealth management products to “Ponzi” schemes.

In the Xinhua news report, citing figures from China International Capital Corporation, it said that, by the end of 2012, outstanding wealth management products amounted to RMB7.1 trillion ($1.2 trillion), higher than the RMB5.6-trillion-fiscal revenue collected by the central government in that year.