A giant step for equity

A number of banks in China have started offering equity-linked structured deposits to the country's retail investors. However, China's derivatives regulations explicitly prohibit banks from offering equity-linked products. How have banks got around this legal grey area? Duncan Wood investigates

With Christmas just gone, bankers in China are still gleefully unwrapping an unexpected gift from the country's regulators. The derivatives industry had already been presented with brand new markets for warrants, renminbi-denominated forwards and currency swaps in 2005, but all these developments, while exciting enough, were overshadowed by what appeared to be a U-turn on the subject of equity derivatives.

Banks had long been reconciled to the idea that equity derivatives were rendered