(Yicai Global) April 24 -- Many large Chinese firms listed on the mainland are using arbitrage to profit from wealth management products offering much higher returns than the low interest-bearing loans they can leverage.

Listed firms bought CNY282.2 billion (USD39.9 billion) of financial products in the first quarter, according to financial information service platform Wind.

The average rate of return for wealth management products in China was above 4.2 percent last year, while the cost of new loans has only been 3.2 percent since August, video conferencing firm Yealink Network Technology said. Firms can also get a 50 percent discount on the interest rate for corporate loans, making their borrowing costs far lower than the average yield of financial products, it added.

Over 70 listed companies have bought wealth management products valued at more than CNY1 billion (USD141.4 million) this year up to April 22. Four of them spent more than CNY5 billion each. Leading Chinese express courier SF Holding splashed out CNY18.2 billion.

With so many small and medium firms unable to get loans, regulators need to step in quickly to ban this practice of arbitrage, otherwise it will raise the cost of borrowing for everyone, experts said.

Another big spender was silicon wafer giant Longi Green Energy Technology which bought CNY7 billion (USD989 million) of financial products from seven banks. It topped that up with another CNY7.5 billion from other lenders when the first lot expired earlier this month, statements from the company show.

Xiamen-based Yealink is planning to apply for a further CNY800 million (USD113 million) in credit from banks. As of the end of last year, it had CNY3.5 billion in wealth management products, almost a third more than the year before. By the end of March, it had hiked the amount invested in short-term loans to CNY201 million from CNY50 million in December.

Editors: Tang Shihua, Kim Taylor