Whilst summer is almost upon us, unfortunately it seems that the Chinese internet finance industry is still stuck in winter. In the most recent article published by Sheng Songcheng, head of statistics at the People’s Bank of China, it said that bank deposits from money-market funds, for example Yu’e Bao, should be subject to reserve requirements just as traditional bank deposits. Such reserve requirements should be applied indirectly – only on those amounts held by banks on behalf of these investment companies.

Yu’e Bao, the investment product offered by China’s e-commerce giant Alibaba, has accumulated at least 500 billion yuan ($81 billion) in deposits as at the second week of March 2014. Similar financial products provided by its rivals Tencent and Baidu are also hugely popular in China, as more and more people demand alternative financial products in their search for higher yields.

According to the article, the annualized return of Yu’e Bao would be reduced by one percentage point if there were a 20% reserve requirement on the portion of its money placed as deposits with banks. Currently, most of the internet financial products offer a return of about 5% – 6% to investors, still well above the maximum 3.3% that banks can offer on a one-year fixed deposit.

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Scully Wan

Beijing based tech contributor. Follows social media, e-commerce, digital currency, healthcare and life science, economy, fashion and design, and everything that involves inter-cultural phenomena. You...