Shenzhen to Reinforce Regulations of Financial Products
China is reinforcing the regulation of financial products that are available through the internet. Financial products that uses the internet are fast gaining attention such as Alibaba’s deposit like money market funds Yu’e Bao. The governor for the People’s Bank of China Zhou Xiaochuan stated that authorities will not be banning internet financial products but instead will be improving the regulations in the sector.
Tighter regulations will be created for these products and at the same time regulators don’t want to squash innovative products that cn shake the country’s financial system that economists say is doing a poor job in serving smaller services and individuals. Alibaba started offering the Yu’e Bao online money market fund in June 2013 and by mid February this year has already attracted 400 billion yuan.
The Yu’e Bao of leftover treasure attracted the equivalent of around 0.5 percent of the country’s 74 billion yuan worth of deposits. Based on a report done by the China International Capital Corp projects predicted that in three years, products such as the Yu’e Bao can manage funds that are comparable to 8 percent of bank deposits.
The success of the Yu’e Bao and similar products have also attracted complains from banks stating that it will drain bank deposits and are asking regulators to be tough on these types of financial products.