Online investment products craze alerts China’s financial sector
February 1, 2014 Leave a comment
Online investment products craze alerts China’s financial sector
Staff Reporter
2014-01-29
Several Chinese internet and fund companies recently launched investment products and promised a return higher than those available in the market by subsidizing investors, reflecting the impact of online operations on traditional banks, the Chinese-language Global Entrepreneur magazine reports.
The latest company joining the online finance race is web portal Netease, which began accepting investor applications for its fund on Dec. 25, with a promised return of 10% on an annualized basis, the magazine said.
The launch followed search giant Baidu’s introduction of its online financial products under the Baifa brand two days earlier, which is advertised with an annual return of 8%, the magazine added.
These new products, the magazine said, sparked a debate on the different approaches used by internet companies and traditional banks for selling financial products.
Internet companies often call traditional banks “dinosaurs,” while companies in the financial sector responded by saying that subsidies could not last forever, according to the magazine.
Regulators have stepped in and made their stance clear on products promising higher returns with subsidies. Two online fund companies, Fund123.cn and Shanghai Tiantian Fund Sales, were each fined for improper advertising that highlighted the promised returns.
The fine, the magazine noted, has reminded internet companies that the highly regulated market is difficult to break.
The person in charge of Netease’s fund service told the magazine that the web portal plans to launch three to four products before July, but the subsidies would not be limitless. Netease currently requires investors in its product to register with the web portal’s mobile instant messaging app Yixin.
Baidu pays subsidies to acquire user information with more details than those obtained through its search engine, and the costs of the approach are actually quite low.
On the other hand, the popularity of the online financial products reflects considerable market demand, which has led to the creation of a capital chain, of which banks are not a part, the magazine said.
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