China’s banking sector, already under the shadow of a credit crackdown and concerns over bad debt, may face a new headwind with the country’s Internet players entering – and disrupting – the market.
“China’s internet giants are mobilizing millions of individuals to take on the big banks, forcing well-fed bankers to cough up a fair deal on yields on cash deposits that conventionally have been taken as a given under the existing suppressed deposit rate regime,” Steve Wang, chief China economist at financial services group Reorient, said in a note.
In the past six months, Yuebao – a venture under the wing of Internet giant Alibaba – raised around 250 billion yuan ($41.3 billion) from money market investments offering rates much higher than the around 3 percent benchmark time-deposit rates. The offering has become China’s largest fund product.
Starting this Friday, pre-registered Yuebao account holders will be able to put money into a principal-protected 12-month term deposit with an expected yield of 7 percent, Wang noted.
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.