Opinion | Yu E Bao's future may offer clue to the potential of state reforms
How the CSRC handles Alibaba’s new investment product may reveal whether Beijing sends in private entrepreneurs to shake up state sector
The words to watch next year are Yu E Bao (Leftover Treasure). They will offer a significant clue to the role of private entrepreneurs in the eyes of President Xi Jinping and the potential of his reforms.
But don't focus on the amount of money depositors put into the new investment product, distributed by Alibaba, even though it grew from zero in June to more than 100 billion yuan (HK$127 billion) by the end of last month and is breaking records every day.
How it is treated by the regulators is the game to watch.
For small depositors on the mainland, Yu E Bao is a dream come true. Say you put 1,000 yuan into an account with Alipay, the mainland's largest third-party online payment system. You spend 200 yuan on a pair of shoes and put the rest into Yu E Bao.
You get more than 5 per cent interest from Yu E Bao, compared with the close to zero rate offered by banks. And you can spend the money at any time on a must-have item found on the internet.
It is not hard to imagine the shock this has caused to traditional banks. Who will keep their money in banks when they can enjoy the convenience of a demand deposit with the returns of a longer-term deposit without having to lock up their funds?