18 January 2020


Chinese e-commerce giant Alibaba Group is stepping up its push into online financial services by buying a 51 percent stake in Tianhong Asset Management Co. Ltd. Alibaba’s move will undoubtedly change the landscape of the financial services industry currently dominated by state-owned enterprises, as the public is given more access to various financial products at lower costs. Banks and traditional financial service providers are under increasing pressure to add the internet finance model to their existing physical branch network so as not to miss the rising opportunities of online financial business. Moreover, other internet and non-financial companies are considering similar forays into online fund management services, which offer huge business potential. In June, Tianhong and online payment service provider Alipay, an Alibaba unit which has 800 million registered accounts, launched a new fund and payment platform called Yu E Bao to help Alipay customers invest their spare cash into a money market fund. In its first 18 days, the fund attracted more than 2.5 million customers and raised 6.6 billion yuan (US$1.08 billion). Customers can invest as little as 1 yuan in the Yu E Bao service and can withdraw their money and return it to their Alipay accounts at any time.

Liquidity management: The People’s Bank of China is expected to see a net cash injection into the financial system this week, after a week-long National Day holiday when the financial markets were closed. However, the size of the net liquidity pump could be smalller, compared with the 150 billion yuan in the week ended Sept. 27 when the central bank wanted to ensure ample cash for banks to meet end-of-quarter capital requirements as well as the funding needs of the public for the holiday. Moreover, policymakers want to create a supportive funding environment for economic activities to uphold the still-fragile growth rebound. Money markets are likely to linger at lower levels. According to official data, the central bank sold 65 billion yuan worth of seven-day reverse repurchase agreements (repos) on Tuesday, and 80 billion yuan of repos are due to mature this week.

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