Web China: Reported Internet finance rules perturb Chinese public
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E-mail Xinhua, March 21, 2014
From a TV commentator's rant against netizen's favorite financial product to looming regulatory measures, Internet finance has remained in China's headlines for months.
The online shopping boom has precipitated a scramble by e-commerce leaders like Alibaba and Tencent to give customers a quick and convenient way to pay. Online payment systems have resulted in spinoffs of almost anything from cheap cab fares to so-called "wealth management".
While a maximum of 3.3 percent is available annually on bank deposits, Alibaba's Yu'ebao and its ilk are offering nearly 6 percent and promise users flexibility, including capital transfer or withdrawal at any time without losing any interest. The services cost nothing, another feature that conventional banks cannot match. Such hidden treasures catapulted the Yu'ebao user base to over 81 million in just nine months, with around 500 billion yuan (81 billion U.S. dollars) flowing through the system.
Such large scale developments have not gone unnoticed by the banks, and their ire is rising as the new comers are eating away at bank profits and challenging the old norms. Authorities are also on the alert and claim there will be no ban on web products like Yu'ebao, but the regulatory regime will be strengthened to ensure "healthy" growth.
The comparatively benign attitude of financial authorities seems to have swung around somewhat, and authorities are now adopting a more circumspect tone. The People's Bank of China (PBoC), China's central bank, issued a notice last week suspending Tencent and Alibaba's planned virtual credit cards and payments via code scanning over "security" concerns.
On Tuesday, reports went that the PBoC released another draft regulation specifically controlling capital transfer and consumption through third-party online services.
The new rule states that transfers should not exceed 1,000 yuan per transaction - a bit more than 160 U.S. dollars - and there will be an annual limit on transactions of 10,000 yuan. Payment of more than 5,000 yuan in a single deal will not be allowed, with monthly accumulative consumption payment not exceeding 10,000 yuan. However, such reported regulations are yet to be confirmed by the central bank.
The reports drew instant criticism, as well as deep concerns about the central bank's true motives.
A netizen under the screen name of "Crazy Phillips" said that, if implemented, the new rules will not only hit online spending, but they are likely to infuriate the public.
Ren Zhiqiang, president of Hua Yuan Group, a real estate developer, denounced the regulation on his Weibo microblog, saying central bank intervention could be a bad example for the reform effort. No matter how the players compete with one another, the last thing a central bank should do is to tell people how to spend their money. "It's a restriction on market transactions, on economic growth, and even on people's right to decide how to use their assets," he said.
Many are questioning whether the restrictions were genuinely made out of security concerns, as a central bank official claimed, or if the restriction is nothing more than protection of bank profits. Historian Cao Junshu said on his microblog that the news is "shocking". He called such a regulation "absurd", and queried the banks vague mumbling about "protecting capital security".
Alibaba and Tencent claim not to have received any supervisory document from the central bank as yet, and all their services continue to run as normal, but the regulation is still at the stage of soliciting public opinion.
Netizens said caution is one thing, but abrupt denial of Internet finance-related products is quite another. "As the Chinese economy continues to develop, the country needs further, deeper reform: financial reforms should be to the fore in that regard," said the verified Weibo account of Ruidian-Daiweilai, an investment management company based in Hangzhou.
Online peer-to-peer lending, coupled with the boom of Internet finance in general, has been a major impetus for liberalization of interest rates. As an intrinsically cautious institution, the central bank should be "slow" in rolling out any tough measures, Ruidian-Daiweilai said.
Sheng Songcheng, head of surveys and statistics at the central bank said on his Weibo account that huge interbank deposits by funds like Yu'ebao should be subject to reserve requirements. Currently, big banks are required to hand 20 percent of their deposits over to the central bank as reserves. Interbank deposits with negotiable interest rates and early withdrawal options are not subject to these reserve requirements.
Sources at the central bank told Xinhua Friday that the reported regulation is just a draft edition, and more discussions on it need to be conducted for improvement, adding the regulation will not be released in the near future. Endi
