Alibaba, Tencent and Baidu are three tech companies which are offering online finance products at higher yields than bank deposits and thus have become quite popular with private investors. So much so that regulators are taking notice. Although regulators hope that the leading Internet companies could play a role in making China’s banking system more competitive, they are concerned about the lack of transparency of these products in particular and China’s shadow banking system in general. China’s regulator, the People’s Bank of China, is now gearing up to foster a healthy development of the sector.
Last summer the Alibaba Group launched Yu ‘E Bao (Leftover Treasure) through its online payment subsidiary Alipay. The product is similar to a money market fund. By mid-January it had more than 49 million customers with more than $40bn in investments. According to Morningstar (investment -research) the $30bn which Alipay held in December made it the world’s 4th largest money market fund. Currently Yu ‘E Bao offers 6% interest versus 3.3% banks can offer on deposits and other liquid assets. Alipay now offers wealth management products.
Source: Wall Street Journal