Yu’ebao hits 100 million subscriber mark

Yu’ebao hits 100 million subscriber mark

Staff Reporter

2014-06-11

Over the past year since its launch on June 13, 2013, Yu’ebao, an online public fund operated by Chinese internet giant Alibaba Group, has had a revolutionary effect on China’s public funds and even the overall financial market, reports the Beijing-based Economic Information Daily.

Yu’ebao’s performance has beaten expectations, having reached 81 million subscribers and 500 billion yuan (US$80.3 billion) as of the end of February, the latter the fourth largest among money funds worldwide. The scale climbed further to 541.3 billion yuan (US$86.9 billion) as of March 31 and the number of subscribers has now topped 100 million, the paper said. Thanks to the contribution of Yu’ebao, the total capacity of China’s public fund market has surged 40% year-on-year to 3.4 trillion yuan (US$551 billion).

Yu’ebao’s success has prompted other leading internet platforms to launch online public funds, including Baidu, Sohu and Tencent. Leading financial institutions such as the state-owned Industrial and Commercial Bank of China (ICBC), Ping An Insurance and Bank of Communications have followed suit. Moreover, Yu’ebao has spawned a string of other innovative online financial products such as online securities, P2P and public fundraising.

The Chinese regulator has conditionally sanctioned online financial products, which it believes can expand the service coverage of the capital market.

Yu’ebao has caused a stir in the Chinese financial market. According to Wind statistics, renminbi deposits at local banks decreased by 1.2 trillion yuan (US$198 billion) in April from a year earlier, as savers transferred massive amounts of money from their bank accounts to Yu’ebao and other online funds, attracted as they were by the latter’s yield rates which are much higher than bank rates.

Critics have dubbed online funds as “financial parasites,” sucking windfall from banks without bearing any management risk and thereby boosting overall funding costs, the paper said. However, many market players have affirmed Yu’ebao, saying it has pushed market-based interest rates. “Liberalization of deposit interest rates is on the agenda of the government may be realized in one or two years,” said Zhou Xiaochuan, president of the People’s Bank of China, earlier this year during the annual “lianghui,” — the twin meetings of the National People’s Congress and the Chinese People’s Political Consultative Conference in Beijing.

Meanwhile, Yu’ebao has enhanced the yield and threshold for public wealth management and has forced banks to strengthen product and service innovation, facilitating the advent of market-based interest rates, noted Yang Chu, a researcher at the development and research department of the Beijing-based Hua Xia Bank.