Chinese banks and financial institutions in April issued 2,439 wealth management products, a kind of high-interest deposits. The figure was 12.8 percent lower than in March, according to 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.

According to the website, average yields of products with a term of shorter than one month have fallen 28 basis points to 3.58 percent in the week ending May 11, from the last week of March, during which the latest tightening measures were launched.

Guo Tianyong, a professor at the Central University of Finance and Economics, said he had expected the drop.

"China has limited the investment of wealth management products in non-standard assets, which inevitably led to a decline in new products," said Guo.

Non-standard assets, which are not traded on the inter-bank market or stock exchanges, includes trust loans, acceptance bills, letters of credit, accounts receivable and other credit products, according to the the China Banking Regulatory Commission.

Zeng Gang, a banking expert with the Chinese Academy of Social Sciences, said non-standard assets usually yield comparatively higher returns among all the investment objectives for wealth management products. "Once investment into these assets becomes less, the yields will fall."

Wealth management products have boomed in China over recent years as investment channels are limited and inflation is considered high.

By the end of 2012, outstanding wealth management products amounted to 7.1 trillion yuan ($1.2 trillion), higher than the 5.6-trillion-yuan fiscal revenue collected by the central government in that year, a report of China International Capital Corporation (CICC) showed.

Zeng said China launched the tightening regulations for two purposes -- safeguarding the buyer's interests and dissolving risks in the country's shadow banking system.

More Chinese customers are eyeing wealth management products to seek higher returns. There is a margin of roughly one percentage point between bank deposits and wealth management products.

But problems also emerged, with one product sold through Huaxia Bank failing to pay its return last year and another product by CITIC Trust delaying payments.

The regulation required that investment in non-standard assets should be no higher than 35 percent of the bank's total outstanding wealth management products, or no more than 4 percent of the bank's total assets at the end of the previous year, in an effort to reduce default risks.

By the end of last year, 40 percent of the outstanding wealth management products, or 2.8 trillion yuan were invested in non-standard assets, a CICC report showed.

The tightening of wealth management products also came after Chinese banks' rush to sell such off-balance-sheet products in recent years to evade regulatory oversight.

Wealth management products are believed to help channel funds to property developers and local government financing vehicles (LGFVs),raising concerns over China's shadow banking system, a fast-developing, unregulated sector.

Zeng said "standard assets," referring to financial tools traded in the inter-bank market, will be the main investment direction for wealth management products in the future, citing asset securitization products as an example.

"The shrinking business brought by new rules will only be temporary," said Zeng. "The new controls will push banks to be more innovative in the wealth management business, helping the sector to develop in a much healthier way."

Zeng said there is great room for wealth management products to develop in China as it has just reached a level equal to about 11 percent of the country's total outstanding yuan loans, which stood at 63 trillion yuan last year.