Alibaba gains approval to establish commercial bank in Hangzhou

Alibaba Group may increase both its capital and the amount it lends after approval from the country's banking regulator to establish a commercial bank in its home base of Hangzhou where it will offer deposit and loan services.

Alibaba got the green light to establish the bank with a number of partners, the China Banking Regulatory Commission said yesterday. The regulator also approved the establishment of another private bank in Shanghai to be set up by the Juneyao Group and garment brand Metersbonwe Fashion & Accessories.

Alibaba has the potential to lead the competition against Tencent in the e-finance sector, though it is not among the first batch to gain approval.

"I have no doubt that Alibaba will be stronger in the finance sector, with more experience in the industry and more valuable customers," said Cao Lei, director of the China E-Commerce Research Centre in Hangzhou.

He said compared with rival Tencent, whose users were mostly individuals on its WeChat communication platform, Alibaba had more loyal enterprise users on its trading platform.

Ma Tao, an analyst at Analysys International, said private banks would be a good supplement to traditional banking services on the mainland. "Private banks run by Alibaba and Tencent will serve small enterprises, for whom it is difficult to get loans from state-owned banks," he said.