One area of applied science and business where China is a world-leading innovator and early adopter of new technologies and ideas is Internet-based financial services. These range from ‘wealth management products’ 理财产品 to mobile phone payment systems.
Baidu 百度, Alibaba 阿里巴巴 and Tencent 腾讯 (aka the BAT companies, see Chapter 3 ‘The Chinese Internet: Unshared Destiny’, p.106) all operate mobile phone apps by which users can send money electronically to friends, or pay taxis, restaurants and shops. The technology and platforms are already in place for large numbers of Chinese people to use their phones as virtual wallets. The only obstacles are government regulations and the reluctance of companies and merchants to accept a new form of payment. There is enthusiasm in some quarters of the government for the innovation that technology companies will bring to finance: the big Internet companies are successfully applying for a growing range of licences that permit them to operate credit cards and other financial services. However, the very newness of the industry means regulators remain wary; for example, in March 2014, the central bank demanded Tencent and Alibaba halt their mobile payments systems, citing concerns over the security of their verification procedures. As of publication of this Yearbook, those payment systems are working again, but the authorities have not issued clear guidelines for such services.
The BATs also all offer online investment products that have so far yielded better interest rates than bank savings accounts. Alibaba’s Yu’ebao 余额宝, launched in 2013, was the first Internet-based fund. By June 2014, it claimed one hundred million users with 574.1 billion yuan under management. The company says most investors are under the age of thirty, and that they enjoyed an average annualised yield of 5.5 percent. The funds are friendly to small investors: some individuals invest as little as one hundred yuan. The companies invest a large part of the funds in intermediate- or long-term deposits at commercial banks to take advantage of high interest rates.
Many traditional funds that hold a portfolio of shares in listed Chinese companies have begun to offer investment packages via online marketplaces like Alibaba’s Taobao. As for the Internet company products, minimum entry requirements for these are also very low.
Another category of Internet finance is peer-to-peer or P2P lending. Websites such as PPDai.com allow investors with cash to connect with individuals and small businesses who need loans.
Finally, China has a thriving market in Bitcoin. The Central Bank barred financial institutions from handling Bitcoin transactions in December 2013, ending a speculative boom by making it difficult for Chinese people to get cash into or out of the Bitcoin system. But the cryptocurrency itself is not illegal and there are still enthusiasts and startup Internet companies offering related services such as the Bitcoin marketplace BtcChina.com.