With the quick coming of internet financial products, Chinese people have more choices in the ways of "making money".
Online investment services such as Alibaba's Yu'E Bao and Wechat-based Licaitong appeared to overtake the traditional bank deposit to be the preferred way for many customers, especially before the Spring Festival holidays from Jan. 31 to Feb. 6. for year end bonuses.
The new wealth managements initiated by internet companies have changed the financial landscape dramatically.
Yu'E Bao has attracted over 300 billion yuan since last June, making its fund manager Tian Hong Asset Management from nobody to China's second-largest public fund in several months.
Yu'E Bao's win is due to Alibaba's two biggest strengths, the mature e-commerce platforms Taobao and Tmall , and its trusted online payment system Alipay, where e-shoppers are used to deposit money.
Also, like current deposits at banks, money invested in Yu'E Bao can be used to shop on Taobao and can be withdrawn at any time.
Tenpay (known as Licaitong in Chinese), based on Tencent's popular mobile chat application, Weixin, or WeChat, which is a third party online payment service, promised an impressive seven-day annualized return 18 times more than the banks' deposit rate and higher than its rival Yu'E Bao's rate by almost one percent.
Tencent brilliantly rolled out a Spring Festival digital red envelope activity in which gifters and giftee who attempt to get lucky money have to set up a mobile payment account and bind their bank cards to WeChat.
Despite the higher interest rate and well-received red envelop scheme, "Wechat is not quite associated with money."
"Unlike Alibaba, so it remains a challenge whether such a collaboration would be successful," according to a head of research with a consultancy firm.
While they were quickly evolving into the potential users. Chairman Ma Yun of Alibaba alarmed that rival's greeting program could be "Pearl Harbour attack."
Yields from the favorite internet investment products declined unexpectedly during the holidays, with Yu'E Bao's earnings rate standing low at 6.04 percent on Feb. 6, and that of Licaitong dropping 1.15 percent in 13 days.
Part of the reason may lie in unsustainable high returns from their investment, according to industry insiders.
Online finance products like Yu'E Bao or Licaitong are essentially equals to a kind of money market fund. More than 80 percent of the cash they collect have been invested in agreement deposits and deposit reservation for balance.
Banks have been short of cash to meet requirements before the Spring Festival holidays, so higher interest rates were offered in order to gain money from public financing products.
But when liquidity eases, the interbank rate will not remain high forever, and returns from online investment products will return to a normal level of 3 or 4 percent, fund analysts predicted.
"The high return on Internet finance products is not sustainable if they invest too much in risky sectors such as real estate and trusts," said Zhao Qingming, finance professor with the University of International Business and Economics.
"Investors should treat Internet finance with more circumspection, instead of just following the herd," Zhao reminded the investors.
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