Upstart financial institutions have been using technology to encroach on areas typically the province of China’s state-run banks, according to a senior central bank researcher. And the country’s regulators should set up rules allowing those traditional firms to create online finance units to battle that competition.
That’s the sentiment expressed by Yao Yudong, who heads the central bank’s financial research institution, and quoted in the state-run Economic Information Daily and cited in turn by Reuters on Thursday (June 18). The researcher said China’s lawmakers should exhort financial companies to push for growth in areas including peer-to-peer lending, crowdfunding and eCommerce — and these efforts would be aided by the creation of online operations.
There have been a number of challengers to the traditional status quo within China’s financial industry. Perhaps most notable have been companies including Alibaba Group Holding, who along with Tencent Holdings, has been steadily making inroads into the financial mainstream, offering several services across one company. In Alibaba’s case, recent corporate actions have included investments in operations as far flung as online payments, financial data and even a foothold in financial news — the latter movement coming earlier this month when the company said it would invest roughly $194 million in China Business News. The traditional banks are constrained by rules and are “falling behind,” according to Reuters.
In one shot across the bow, Industrial and Commercial Bank of China Ltd, the biggest lender as measured by total assets, debuted the first finance brand to be taken to the Internet (that is, from a traditional Chinese lender) and called it “e-ICBC.” And though the online eCommerce platform may be dwarfed by Alibaba’s annual gross merchandise volume of $370 billion in just the past year, Reuters noted that the e-ICBC venture has racked up nearly $26 billion in sales volume over the last 12 months since its launch.