Alibaba launches investment product

Leading e-commerce firm Alibaba Group announced Monday the launch of a new investment product on its Alipay online payments platform, allowing users to buy into a money market fund.

Alipay aims to offer a new investment channel for users, and money market funds have less risk than other financial products, Fan Zhiming, president of the domestic business group with Alibaba's small and micro financial services unit, said at a press conference Monday.

A money market fund is a type of mutual fund that invests in short-term debt securities and government bonds.

When users put money into the product, they will invest in the money market fund automatically and the new service can also support online shopping payments and money transfers, said Fan.

The first money market fund available on Alipay will be Zenglibao, offered by Tianjin-based Tianhong Asset Management Co, with a minimum investment of 1 yuan ($0.16) and no maximum limit.

Zenglibao's average annual compound rate of return for seven-day periods reached 3.981 percent by Sunday, higher than the current one-year fixed deposit rate of 3.25 percent, according to the data provided by Tianhong.

Such high returns will attract capital inflows, which is likely to influence the country's banking business in the long run and push forward the reform of the sector, said Wang Weidong, an industry analyst with iResearch.

Reform is needed in the country's financial sector and input from outsiders is also required during the process, Alibaba Chairman Jack Ma said during the 2013 Bund Global Financial Summit on June 2.

But Zhu Jian, senior manager with the Alipay PR department, told the Global Times Monday that they just aim to help users maximize returns from their spare money, rather than posing any threat to banks.

The service was first tried out on Alipay on June 13, and has already received a lot of market attention and interest from users, said Zhou Xiaoming, vice general manager of Tianhong, at the press conference.

Given Alipay's large number of registered users, the prospects are bright, Zhou noted.

Currently, Alipay has 800 million users, but not all of them are qualified to use the new service, in compliance with China's laws for money market fund investment. Potential users of the service must register with their real name and be 18 or over, said Zu Guoming, director of Alipay's financial division.

Wang from iResearch said Alipay's large user base could not be overlooked, but the market reception of its new service will also rely heavily on the capacity of Tianhong, as people often prefer large companies for managing their assets, and Tianhong has not achieved that scale yet.

Besides, even though it will be easy to invest in Zenglibao via the Alipay platform, it will not be possible for funds to be withdrawn directly from Tianhong at present, which may cause safety concerns and put people off from investing large amounts of money, he said.