No Yu’ebao ban but central bank looks to regulate Internet finance
Print Edition
The central bank will improve regulations on Internet finance but will not ban products like Alibaba’s online money market fund Yu’ebao, Zhou Xiaochuan, governor of the People’s Bank of China, said yesterday.
It was the latest official comment in an heated debate on whether the booming money market funds are damaging the economy and whether their online sales should be contained.
Zhou made the comments on the sidelines of the annual National People’s Congress referring to the booming money market funds promoted by Internet giants such as Baidu, Alibaba, and Tencent.
Yu’ebao, the largest of such funds, is managed by Tian Hong Asset Management, in which Alibaba holds a 51 percent stake, and is now sold online with 250 billion yuan (US$40.69 billion) under its management as of mid-January.
The funds, operated by various fund houses, normally allow real-time redemption for withdrawal under 50,000 yuan, and typically offer annualized yield of around 6 percent, figures for recent weeks show.
Currently, the funds are subject to regulation by the China Securities Regulatory Commission while third-party payment platforms are inspected by the central bank.
Chen Liang, head of communications for Alibaba’s payment unit Alipay, said yesterday that the regulators have on average made one regulatory request every six days since Yu’ebao was introduced.
A total of 43 regulatory measures have been issued so far targeting Yu’ebao by the central bank, CSRC, and the National Audit Office in the form of registration, on-the-spot study, and investigation, Chen revealed.
Some financial commentators and industry insiders, including Ma Weihua, former head of China Merchants Bank, said that money market funds were not helping China’s economy as they take money away from banks by offering high returns, and reinvest it into the banking system as negotiable deposits.
Some have proposed tighter control on fund sizes and interest rates.
Internet firms are also being targeted because they do not inform investors of potential risks, and sometimes offer additional cash incentives for investors to buy the funds as a way to boost their user base.
But other analysts have hailed the funds, saying that they squeeze banks’ excessive profits taken from the gap between deposit and lending rates, and offer real benefit for investors.
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