WSJ on Chinese Online "Money Funds"
The Wall Street Journal wrote Friday and again Saturday on new online Chinese "money market" funds. Its Saturday article, "China Online Funds Pressure Deposit Ceiling, Ex-PBOC Vice Governor," says, "Online money-market funds are putting pressure on the central bank's ceiling on bank deposit rates, but regulators welcome the development, a former vice governor of the People's Bank of China said Saturday. "Regulators are pleased by this development," Wu Xiaoling told reporters on the sidelines of the annual session of China's parliament. "Internet finance has given a big boost to the nation's financial reforms." China maintains a ceiling on interest rates paid on deposits at the nation's banks but it has vowed to make interest rates more market-based. Online money-market funds, which aren't subject to the limits, have been able to offer substantially higher returns, effectively helping regulators in their deregulation efforts, though raising concerns at the nation's banks. Chinese e-commerce giant Alibaba Group Holding Ltd. launched an online money-market fund called Yu'e Bao last June, and the fund had attracted more than 400 billion yuan ($65.4 billion) as of the mid-February. Savings accounts offer a minuscule interest rate of 0.35% a year while a one-year fixed deposit can pay 3.3%. Yu'e Bao and other similar products provided by tech companies are offering about 6% a year. Experts say online money-market funds have forced banks to offer similar products, but banks are lobbying regulators to clamp down on the money-market funds before they siphon off more of their deposits. These funds are investing in the interbank market and domestic bonds. Central bank Governor Zhou Xiaochuan said this week that regulators want to refine regulations covering online funds but have no intention of cracking down on these competitors to the nation's banks." The Journal's Friday piece, "For China's Online Money Funds, the Game Changes," showed Alibaba's Yu'e Bao fund among a list of the largest money market funds worldwide.
