From Meltdown to Reform: The Yuan You Bao Crisis
Research Article
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From Meltdown to Reform: The Yuan You Bao Crisis

Ziyi Yan 1*
1 University of Washington
*Corresponding author: ziyiy2004@gmail.com
Published on 5 November 2025
Journal Cover
AEMPS Vol.238
ISSN (Print): 2754-1177
ISSN (Online): 2754-1169
ISBN (Print): 978-1-80590-519-6
ISBN (Online): 978-1-80590-520-2
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Abstract

In April 2020, Yuan You Bao, a retail financial derivative product launched by Bank of China, encountered unprecedented losses when the NYMEX WTI May futures contracts settled its price at -$37.63 per barrel. This incident reflects the cruel reality about China’s retail finance ecosystem by revealing the structural weakness in product design, disclosure, and risk controls. This paper aims to apply a qualitative method, combining regulatory documents, media reports, and comparative international frameworks on investor protection and product governance, to analyze. Problems addressed in this research are purposed to conclude why a commodity derivative reached mass-market shares, and how institutional risk management malfunctioned, as well as what measures of reforms are worth considering to align retail-facing derivative products with long-term stability. Methods applied include timeline reconstruction, stakeholder analysis, and comparison to EU MiFID II product-governance and PRIIPs disclosure regimes and U.S. Title VII (Dodd-Frank) conduct standards. The research finds there is a mismatch between product structures and investor capacity, insufficient margining and position-limit safeguards, delayed rollover safety protocols, and limited updated risk communication. From the macro-perspective, this incident indicates that the financial market in China requires further regulatory methods, including robust product-approval committees, negative-price logistics, suitability gating, and pre-contractual information disclosures. The paper draws a conclusion that the financial crisis should catalyze governance and regulation upgrades across Chinese banks and accelerate rule-making that balances financial innovation for protecting investors’ stakes.

Keywords:

Yuan You Bao, negative oil price, retail derivatives, product governance, investor protection

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Yan,Z. (2025). From Meltdown to Reform: The Yuan You Bao Crisis. Advances in Economics, Management and Political Sciences,238,10-17.

References

[1]. CFTC. (2020) CFTC Staff Publishes Interim Report on NYMEX WTI Crude Oil Futures and Negative Pricing. Press Release, pp.8315-20.

[2]. Reuters Cheng L., Lee S.Y., Chow E., Tham E. (2020) As Chinese banks halt open positions for oil products, investors cry foul. Reuters. Apr 23. Available from: https: //www.reuters.com/article/us-china-bocom-oil/as-chinese-banks-halt-open-positions-for-oil-products-investors-cry-foul-idUSKCN2251SA

[3]. Guo Y. (2020) Banking regulator opens investigation into “paper crude”. Caixin Global. May 20. Available from: https: //www.caixinglobal.com/2020-05-20/banking-regulator-opens-investigation-into-paper-crude-101556586.html

[4]. ESMA. (2023) Final Report on MiFID II Guidelines on Product Governance. Paris: ESMA.

[5]. European Commission. (2021) Commission Delegated Regulation (EU) 2021/2268—PRIIPs KID.

[6]. U.S. Securities and Exchange Commission (SEC). (2015) Derivatives—Dodd-Frank Act Rulemaking (Title VII). Washington (DC): SEC. Available from: https: //www.sec.gov/spotlight/dodd-frank/derivatives.shtml

[7]. Fernández-Pérez A., Menkveld A.J., et al. (2023) The Negative Pricing of the May 2020 WTI Contract. SSRN Working Paper.

[8]. Jones C.M., Shi D., Zhang X., Zhang X. (2022) Understanding Retail Investors: Evidence from China. Working paper.

[9]. Jiang J., et al. (2020) Financial literacy and retail investors’ financial welfare: Evidence from mutual fund investment outcomes in China. Pac-Basin Finance J., 59: 101262.

[10]. Better Markets. (2020) Fact Sheet: CFTC Staff Report on April 2020 Volatility & Negative Price Crash in U.S.’s Benchmark Oil Contract Lacks Clear Objectives and Objectivity. Washington (DC): Better Markets; Nov 23. Available from: https: //bettermarkets.org/analysis/fact-sheet-cftc-staff-report-april-2020-volatility-negative-price-crash-us-s-benchmark-oil/

[11]. Clifford Chance LLP. (2020) Unprecedented drop in price of WTI crude oil futures contract—what to expect from CME and CFTC in response. London: Clifford Chance; Apr 21. Available from: https: //www.cliffordchance.com/briefings/2020/04/unprecedented-drop-in-price-of-wti-crude-oil-futures-contract---.html

[12]. CFTC. (2020) Interim Staff Report on Trading in NYMEX WTI Crude Oil Futures Contract. Washington, DC: CFTC.

[13]. Cheng L., Huang K., Chow E. (2020) Bank of China may compensate up to 20% of investments in oil products: sources. Reuters. May 5–6. Available from: https: //www.reuters.com/article/markets/currencies/bank-of-china-may-compensate-up-to-20-of-investments-in-oil-products-sources-idUSKBN22I06T

[14]. European Insurance and Occupational Pensions Authority (EIOPA). (2018) PRIIPs Regulation—Key Information Documents (KIDs). Frankfurt (DE): EIOPA. Available from: https: //www.eiopa.europa.eu/browse/regulation-and-policy/packaged-retail-and-insurance-based-investment-products-priips_en

[15]. Matheson L.L.P. (2018) The PRIIPs KID and investment funds—briefing note. Dublin (IE): Matheson; Feb. Available from: https: //www.matheson.com/docs/default-source/asset-management---all-publications---briefing-notes/the-priips-kid-and-investment-funds---february-2018---briefing-note.pdf

[16]. Crouhy M., Galai D., Mark R. (2014) The Essentials of Risk Management. 2nd ed. McGraw-Hill, New York.

[17]. The Bank of New York Mellon (BNY Mellon). (2025) Dodd-Frank Title VII disclosures. New York (NY): BNY Mellon; Sep 24. Available from: https: //www.bny.com/corporate/global/en/disclaimers/dodd-frank-title-vii-disclosures.html

[18]. Hull JC. (2018) Options, Futures, and Other Derivatives. 10th ed. Pearson, London.

References

[1]. CFTC. (2020) CFTC Staff Publishes Interim Report on NYMEX WTI Crude Oil Futures and Negative Pricing. Press Release, pp.8315-20.

[2]. Reuters Cheng L., Lee S.Y., Chow E., Tham E. (2020) As Chinese banks halt open positions for oil products, investors cry foul. Reuters. Apr 23. Available from: https: //www.reuters.com/article/us-china-bocom-oil/as-chinese-banks-halt-open-positions-for-oil-products-investors-cry-foul-idUSKCN2251SA

[3]. Guo Y. (2020) Banking regulator opens investigation into “paper crude”. Caixin Global. May 20. Available from: https: //www.caixinglobal.com/2020-05-20/banking-regulator-opens-investigation-into-paper-crude-101556586.html

[4]. ESMA. (2023) Final Report on MiFID II Guidelines on Product Governance. Paris: ESMA.

[5]. European Commission. (2021) Commission Delegated Regulation (EU) 2021/2268—PRIIPs KID.

[6]. U.S. Securities and Exchange Commission (SEC). (2015) Derivatives—Dodd-Frank Act Rulemaking (Title VII). Washington (DC): SEC. Available from: https: //www.sec.gov/spotlight/dodd-frank/derivatives.shtml

[7]. Fernández-Pérez A., Menkveld A.J., et al. (2023) The Negative Pricing of the May 2020 WTI Contract. SSRN Working Paper.

[8]. Jones C.M., Shi D., Zhang X., Zhang X. (2022) Understanding Retail Investors: Evidence from China. Working paper.

[9]. Jiang J., et al. (2020) Financial literacy and retail investors’ financial welfare: Evidence from mutual fund investment outcomes in China. Pac-Basin Finance J., 59: 101262.

[10]. Better Markets. (2020) Fact Sheet: CFTC Staff Report on April 2020 Volatility & Negative Price Crash in U.S.’s Benchmark Oil Contract Lacks Clear Objectives and Objectivity. Washington (DC): Better Markets; Nov 23. Available from: https: //bettermarkets.org/analysis/fact-sheet-cftc-staff-report-april-2020-volatility-negative-price-crash-us-s-benchmark-oil/

[11]. Clifford Chance LLP. (2020) Unprecedented drop in price of WTI crude oil futures contract—what to expect from CME and CFTC in response. London: Clifford Chance; Apr 21. Available from: https: //www.cliffordchance.com/briefings/2020/04/unprecedented-drop-in-price-of-wti-crude-oil-futures-contract---.html

[12]. CFTC. (2020) Interim Staff Report on Trading in NYMEX WTI Crude Oil Futures Contract. Washington, DC: CFTC.

[13]. Cheng L., Huang K., Chow E. (2020) Bank of China may compensate up to 20% of investments in oil products: sources. Reuters. May 5–6. Available from: https: //www.reuters.com/article/markets/currencies/bank-of-china-may-compensate-up-to-20-of-investments-in-oil-products-sources-idUSKBN22I06T

[14]. European Insurance and Occupational Pensions Authority (EIOPA). (2018) PRIIPs Regulation—Key Information Documents (KIDs). Frankfurt (DE): EIOPA. Available from: https: //www.eiopa.europa.eu/browse/regulation-and-policy/packaged-retail-and-insurance-based-investment-products-priips_en

[15]. Matheson L.L.P. (2018) The PRIIPs KID and investment funds—briefing note. Dublin (IE): Matheson; Feb. Available from: https: //www.matheson.com/docs/default-source/asset-management---all-publications---briefing-notes/the-priips-kid-and-investment-funds---february-2018---briefing-note.pdf

[16]. Crouhy M., Galai D., Mark R. (2014) The Essentials of Risk Management. 2nd ed. McGraw-Hill, New York.

[17]. The Bank of New York Mellon (BNY Mellon). (2025) Dodd-Frank Title VII disclosures. New York (NY): BNY Mellon; Sep 24. Available from: https: //www.bny.com/corporate/global/en/disclaimers/dodd-frank-title-vii-disclosures.html

[18]. Hull JC. (2018) Options, Futures, and Other Derivatives. 10th ed. Pearson, London.

Cite this article

Yan,Z. (2025). From Meltdown to Reform: The Yuan You Bao Crisis. Advances in Economics, Management and Political Sciences,238,10-17.

Data availability

The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.

About volume

Volume title: Proceedings of ICFTBA 2025 Symposium: Global Trends in Green Financial Innovation and Technology

ISBN: 978-1-80590-519-6(Print) / 978-1-80590-520-2(Online)
Editor: Lukáš Vartiak, Sun Huaping
Conference website: https://www.icftba.org/Beijing.html
Conference date: 20 November 2025
Series: Advances in Economics, Management and Political Sciences
Volume number: Vol.238
ISSN: 2754-1169(Print) / 2754-1177(Online)

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