A twist on traditional bank deposits has become wildly popular in China. Authorities are reining it in, once again treating the financial system’s symptoms without addressing the disease.

The country’s banking regulator laid out tighter rules last Friday on regulating so-called structured deposits, which amounted to 10.8 trillion yuan ($1.5 trillion) as of September. Yields on such deposits are linked to the prices of other assets from foreign currencies to commodities so they could potentially offer higher returns than conventional...