Each morning when he wakes up, Yang Qingfeng opens an app on his mobile phone to check his earnings from Yu'ebao, China's most popular money market fund.

 

But the 29-year-old IT worker in Beijing never expected that Internet finance would be mentioned in the government work report, a State of the Union-style speech delivered by Chinese Premier Li Keqiang.
 

While addressing the opening ceremony of the National People's Congress,China's top legislature, on Wednesday, Li said the government will promote the healthy development of Internet finance.
 

Internet finance products have become big hits among Chinese people, but they have also received backlash from some experts and bank officials.
 

Since being launched by Chinese e-commerce giant Alibaba last June, Yu'ebao has attracted more than 81 million users with aggregate deposits at nearly 500 billion yuan (81 USD). The sum is bigger than the total value of all other money market funds in China.

 

The instant success has lured many other major Internet companies such as Tencent, Baidu and Netease into the business.
 

Unlike most wealth management products sold at banks, Internet finance products do not have investment thresholds. Meanwhile, traditional banks offer a 0.35 percent demand deposit rate and a 3.3 percent one-year deposit rate, while Internet finance products offer an annualized yield of about 6 percent.
 

The much higher rates have prompted many Chinese depositors to pull money from traditional banks and move it to web-based money market funds.

 

Most money in the money market funds is invested in interbank deposits, which offer higher earnings than those for retail deposits, eating into the profit margins of banks. Many experts and bank officials lashed out by saying they could push up financing costs and therefore hurt corporate earnings and economic growth.

 

Some other Internet finance products, including peer-to-peer lending, also reported explosive growth as people sought higher earnings despite potential bigger risks.
 

Commercial banks have felt the pressure. The state-backed "Big Four" launched a host of products similar to Yu'ebao, trying hard to retain prospective depositors.

 

Internet finance triggered a big debate ahead of the two sessions of the top legislature and political advisory body, which kicked off this week. 

Name

Email

Title

Comment

smaller | bigger

Subscribe via email (Registered users only)

I have read and agree to the Terms of Usage.

Write the displayed characters

Add Comment