Alibaba's online fund Yu E Bao rakes in the yuan as banks suffer
Yu E Bao has attracted some 400 billion yuan since its launch last year, thanks to high interest rates which easily beat traditional bank offerings
Caution with money has guided Beijing resident Mrs Zhu for most of her 82 years. That meant trusting the banks with her savings, aside from her holdings of Chinese treasury bonds. But then word came Mrs Zhu's way of the attractive terms on offer at Yu E Bao, Alibaba's deposit-like online money market fund operated by Tianhong Asset Management.
Just days before the Lunar New Year, Mrs Zhu transferred 30,000 yuan from her bank account to the fund; it was money she had saved for a medical emergency. "I've been hearing good things about Yu E Bao, both from my elderly peers and from the news," said Mrs Zhu, who declined to give her full name.
Despite her son's warnings about security issues associated with internet finance, she was determined to give the online product a try. "It makes me feel good to see I earn some money everyday. My bank account can't provide me that," referring to the daily account updates she receives via text message.
Mrs Zhu is far from alone in her willingness to loosen long-held ties to banks. She is among more than 60 million Yu E Bao account holders who have signed up since its launch last June, data released by Tianhong Asset Management on Wednesday shows.
It makes me feel good to see I earn money everyday. My bank account can’t [do that]
They are drawn to Yu E Bao's high annualised yield that has been in excess of 6 per cent, and as high as 7 per cent. In contrast, traditional short-term money market funds on average offer a 3 to 6 per cent annualised rate of return and they lack the flexibility of Alibaba's online product.