Yu’ebao heralds China’s ‘baby boom’ in new financial services; CCTV commentator calls Yu’ebao a “financial parasite” draining “blood” from banks, and the new financial “babies” are now in the sights of many wily old predators

Yu’ebao heralds China’s ‘baby boom’ in new financial services

Xinhua

2014-03-02

China’s new “baby boom” is not of the demographic variety. New financial systems and products are being born everywhere, bringing trouble to some and great expectations for many.

The financial baby boom started when Jack Ma’s online currency fund Yu’ebao (Leftover Treasure) grew from almost nothing to a global leader, with 50 million investors stumping up 400 billion yuan (US$65 billion) in just eight months.

The very simple recipe of a low investment threshold and high yield has catapulted Yu’ebao and partner Tian Hong Asset Management from obscurity last June to close to the top of the world today.

The miracle has bred many envious copycats who began clawing at the market, scrapping for internet investors, even going so far as to borrow auspicious characters in their names: the character “Bao” means both baby and treasure in Chinese.

Niu Wenxin, a highly regarded commentator with the national broadcaster CCTV, went so far as to call Yu’ebao a “financial parasite” draining “blood” from banks, and the new financial “babies” are now in the sights of many wily old predators.

When Niu described funds like Yu’ebao as another “central bank” with variable yields and huge capital, his hidebound attempt to nullify the new funds like Yu’ebao got little support. Doubts and refutation flooded the internet: What are these funds? Vampires or messiahs?

The creator of Yu’ebao, Alipay, is angling for floatation on the New York Stock Exchange. The proud parent company posted a long statement online, defending their fat offspring and pouring sarcastic scorn over Niu. Alipay’s counterstatement has been reposted and “liked” over 10,000 times.

“Niu knows nothing about finance or innovation,” said a “financial analyst” with the screen name “Yufenghui.”

Yufenghui thinks Niu epitomizes the old guard of monopoly finance and it is quite clear that statements from former bank bosses say more about banks’ defensive situation than the vigorous new babies.

As Yufenghui points out, a former vice president of the central bank, a former deputy director of the banking regulator and former president of the largest state-owned bank all oppose Yu’ebao and, indeed, any online financial products.

“Dongxingguilai” declared that Yu’ebao did not deserve such pressure because it is “neither great or vile,” but basically just a money fund with successful marketing.

Other netizens just mocked Niu for “boldly” comparing the central bank to a vampire.

In fact, traditional banking is simply chasing the market. Products like Xian Jin Bao (Cash Treasure) and Li Cai Tong (Finance Key) have been cobbled together by traditional banks, rendering Niu’s “parasite” metaphor something of a shambles.

The key to the dispute lies in the decisive role of market, as stressed in China’s current economic reform, in setting interest rates on deposits and loans. The days of easy money from huge interest margins will soon be gone for the commercial banks, as the new babies take their first tottering steps.

 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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