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Opening-up state-owned sectors to private capital
国营部门引入更多私人投资
On top of the government’s reform agenda is to open up more state-owned sectors including finance, telecoms and the railway industry to more private investment. CCTV reporter Guan Xin explored the trend of internet companies now venturing into the financial sector, and concluded that while the trend of freeing up China’s financial market is inevitable, the road will be bumpy.
A bold step into the financial sector... hopefully one in the right direction, several well-known private companies have pushed into the financial industry, a sector long guarded by the state.
Attracting savings and loaning to enterprises are no longer a bank’s specialty. Alibaba, Baidu, Tencent Holdings, and even the electrical appliance retailer Suning are among some of the new players.
“Our goal is to provide investment service with an easy and fast experience. Everyone should be able to invest. Financial products should not have high threshold and stay far away from ordinary people.” said Liu Chao, Financial Business Dept. Manager, Alibaba Small & Micro Financial Services Group.
Traditional banks, mostly state-owned ones, however, may view them as a threat. Particularly troubling to state banks is the competitive return that these new players offer on deposits.
Just two weeks after its initial launch, Alibaba’s online platform had 2.5 million customers transferring around 5.7 billion yuan into the fund. And Baidu received 1 billion yuan subscription of its fund on the first day. The success hasn’t gone unnoticed.
Competing directly with state firms, especially with the likes of ICBC, the world’s biggest bank, seems like a daunting task for private firms. Despite the positive reaction from the market, private internet finance could find itself mired in regulation if it steps too far into the territory.
After the intervention of the Chinese Securities Regulatory Commission, Baidu took the "8% guaranteed annual return" out from its marketing slogan.
"Constraints are not a problem. To me constraints sometimes mean opportunities...." said Gu Yunling, Chief Risk Officer, Turbo Financial Group.
Despite lacking clear rules, the government still has good reason not to stamp out the green shoots of the industry just yet.
China’s new leadership has recognized the importance of feeding entrepreneurs and the private sector with credit. A shortfall in that segment of the market birthed a massive shadow banking market four years ago where capital-starved businesses survive on high-interest loans.
Li Zhiguo is venturing into the financial sector and created a bookkeeping and financial management application.
“Recently the State Council has called for financial innovation, and to provide financial services to ordinary Chinese people, and small enterprises. I think that shows it’s a good direction. So we should venture into the field and do some exploration, and make adjustments according to the country’s regulations and policies.” said Li Zhiguo, Founder, Wacai.com.
The new trend draws great attention, not just for the future of online financing, but for the life of private business in China and the calibre of real reform currently underway. But the foray of internet companies into the financial sector despite huge risks is living proof that the opening up of predominately state-owned industries to private capital is an inevitable trend.
