A war of words has erupted among Chinese financial commentators after a senior editor of state broadcaster China Central Television slammed online financial investment services and called for an outright ban.
Niu Wenxin, the managing editor of CCTV’s stock information channel, argued services such as Alibaba’s Yuebao were “financial parasites” and “vampires” in a post on his private blog on Friday. Online funds erode China’s financial system and should be banned by the government, he wrote.
“They profit from raising economic costs for the entire society,” Niu wrote on Friday, referring to interest rates offered by such services markedly exceeding those offered by traditional bank deposits.
Online wealth management services have become extremely popular since Alibaba, China’s largest e-commerce company, began offering its Yuebao online-only investment service in June last year, as returns on online deposits can exceed ten times those offered by traditional banks.
By mid-February, tens of millions of individual investors had entrusted Yuebao with 400 billion yuan (HK$506 billion) in deposits. Other internet giants Baidu, Tencent and Netease have followed suit offering similar online investment services.
Niu however warned that such funds could erode the traditional banking sector’s liquidity by luring savers away from banks and, by inflating interest rates, increase the cost for businesses to borrow money.
Yuebao “is a serious threat to China’s financial security and economic security,” he concluded.
His remarks had triggered a lively debate by Monday on whether he should be taken seriously.
“Can online finance subvert banks?” the People’s Daily, the Communist Party’s flagship paper, asked in a column, arguing for banks to improve their “customer experience” to counter the threat. “If the future is indeed like the CCTV commentator said, [then] we better prepare the house for rain,” columnist Shi Lei argued cautiously in the Guangzhou-based Yangcheng Evening News.
Columnists in commercial newspapers candidly said Niu’s concerns were misguided. “Yuebao plays a positive role in accelerating the liberalisation of interest rates,” Guo Tianyong, a professor of finance at the Central University of Finance and Economics, argued in a commentary in Monday’s China Securities Journal. Beijing News columnist Wen Xiaodong, like Guo, suggested that these services would forcefully push traditional banks towards offering more competitive deposit services.
“The existence of online financial products will push the traditional financial system towards reform,” wrote Wen.
Liu Shengjun, a columnist with the financial weekly Caixin, said Niu’s call for an end to services like Yuebao “met the psychological needs of banks” challenged by online competition. “If Yuebao really is a ‘parasite’, then it is only sucking excessive profits from banks,” he wrote.
Overall bank deposits in China fell by 0.9 per cent or 940 billion yuan to 103 trillion yuan by the end of January, compared to a month earlier. Liu blamed that fall in part on the attractiveness of online deposit services such as Yuebao.
The vast majority of the public also appeared to disagree with Niu, according to a survey on the Sina News website: 90.3 per cent of more than 24,000 people surveyed said online funds should not be banned, while 79.7 per cent said they plan to increase their investments in such funds.
The China Securities Regulatory Commission said last week it would look into regulating online investment services.