Key Charts - Non-Bank Financial Intermediaries
Upstart Alibaba Spurs Change in Chinese Finance
- In China, the government's policy of capping deposit interest rates has set off a competition for the savings of the nation’s growing consumer base, stoking product innovation that takes advantage of regulatory loopholes. Tech companies have introduced online money market funds that offer higher yields than conventional deposits do. Leading the charge is Yu'e Bao, the fund created by e-commerce giant Alibaba's payments arm, Alipay.
- However, challenges to online fund business models and liquidity have emerged. The PBOC easing credit conditions made it harder for Yu'e Bao to compete with deposit returns. Yu’e Bao’s yield today is no longer as high as it once was, with Yu'e Bao dipping to 4.19% versus a peak of 6.76%.
- In order to keep yields high, Yu'e Bao's asset managers have strayed into repo agreements and longer-dated assets that create maturity mismatch risk. 84% of Yu'e Bao assets now have a duration of over 30 days, versus just 39% a year ago.