Hampered by the stringent regulations on loan and wealth management, commercial banks are circumventing the rules by floating private banking arms and teaming up with trusts to grow business.
The banking regulator last month imposed tighter loan controls and curbs on wealth management products to prevent capital flowing into alternative channels like the stock market.
In May, domestic and foreign banks in China launched more than 4,100 wealth management products, with a total investment capacity of 700 billion yuan, according to China Banking Regulatory Commission.
The banking watchdog said in early July that commercial lenders could not deploy wealth management funds in secondary market stocks, securities-backed funds, equities of unlisted companies and non-publicly traded shares of listed companies.
The curbs, however, give banks a strong motivation to develop their private banking business, which is not subject to the new rules.
Private banks, which usually sell wealth management products to affluent people and institutions - a group that can endure higher risk and expects to gain higher returns, enjoy a much more flexible investment principle.
"We invest a portion of the clients' funds in equity and the quantum usually depends on individual risk appetite," Wang Jing, executive deputy manager of China Merchants Bank's private banking department, told China Daily.
Investors are also expecting to reap a fortune after the growth enterprise board (GEB) commences operations later this year. Anticipating this, commercial banks like China Construction Bank and Industrial Bank are planning to launch investment products targeting GEB-listed stocks.