Launch of new products to grow mainland China online finance market

The mainland's largest internet companies are likely to sharpen their collaboration with financial services providers amid greater competition and regulatory risks in the online fund management business, according to analysts.

"We expect new internet finance products to be launched in the second half of this year because the mainland still has the highest national savings rate in the world at more than 50 per cent," said Ricky Lai, an analyst at Guotai Junan International.

Leading the charge would be mainland internet market heavyweights Alibaba, Tencent, Baidu, Sina and NetEase, which were now also competing in the online finance market, Lai said.

E-commerce giant Alibaba, which is preparing for its initial public offering in New York, was the first to launch an innovative online wealth management product for mainland consumers last June. The highly successful Yu E Bao money market fund had raised about 554 billion yuan (HK$696 billion) and signed up about 81 million investors by the end of April.

With Yu E Bao, Alibaba lowered the minimum fund investment to one yuan from the previous average of about 1,000 yuan. This allowed the participation of younger and more middle-class investors, which the other online money market funds that followed have also targeted.

But competition with banks and more recently, from telecommunications network operators, has put pressure on annual yields for online finance products, which have fallen to less than 5 per cent from a peak of around 7 per cent. In a report, Barclays said declining yields had led the internet companies to expand their online finance offerings to include personal loans and investment-linked insurance.