online banking

Chinese tech firms aren't being put off by Beijing's crackdown on internet finance

PUBLISHED : Wednesday, 12 August, 2015, 7:00am
UPDATED : Wednesday, 12 August, 2015, 2:05pm

Chinese anti-virus firm Qihoo 360 has become the latest tech firm to launch its own stock market index and wealth management website, even as the government tightens controls on internet finance.

The fintech industry has come under intense scrutiny from Beijing in the wake of the recent stock market crash which wiped out US$3.5 trillion of value and sent Chinese stocks sliding more than 30 per cent over three weeks.

Online lenders and peer-to-peer lending platforms have been placed under tighter controls to prevent grey-market margin lending, the prevalence of which was blamed by the government for the stocks crash. A draft regulation released this month also suggested limiting transactions via third-party payment services to 5,000 yuan per day.

Qihoo's 360 Internet Plus Index is being launched in partnership with investment management firm Dacheng Fund and the Chinese Securities Index. The service will utilise big data solutions to gather information from the company's search engine, browser and smartphone app products.

Around a third of the stocks traded by the index are on China's small and medium enterprises (SME) board. 29 per cent are on the Nasdaq-style ChiNext Index, which tracks high-growth companies and was one of the worst hit indices by the recent crash, while the remaining stocks are listed on the main Shanghai and Shenzhen boards.

The name of Qihoo's index appears to reference Chinese premier Li Keqiang's much-vaunted "Internet Plus" strategy, which calls for the greater integration of online services with traditional industries, in marked contrast to the tightening regulation of internet finance and other areas.

In addition to the index, Qihoo said it also plans to launch a wealth management website designed to connect low-income consumers not served by the conventional banking system with funds and other financial products.

“Today, Baidu connects people and information, Tencent connects people, and Taobao connects people and goods. What we do, is connect people safely to wealth,” said Wu Haisheng, chief executive of Qihoo subsidiary 360 Financial.

Numerous Chinese tech companies have launched stock indices, online banks and other fintech solutions in recent months, including China's "big three" tech firms, Baidu, Alibaba and Tencent.

The viability of such services – such as Alibaba's online mutual fund Yuebao, which had assets of 579 billion yuan (US$93.25 billion) at the end of 2014 – is in doubt following the announcement of the draft regulation this month, which also called for third-party payment providers to be prevented from providing financial services such as deposits, loans, financing, or currency exchange services to users.

The draft regulation has been criticised by some for seeking to protect state-owned banks from competition with more innovative tech firms.