EC Wednesday’s Worry – Will Alibaba Destroy The World?

“Now it’s time to step up regulation for the industry’s own good,” Yang Kaisheng, a former president of Industrial & Commercial Bank of China Ltd. and now an adviser to the China Banking Regulatory Commission, said in an interview this month at the National People’s Congress in Beijing. “The emergence of Internet financing is inevitable in China because it serves the grassroots better, but whoever is engaging in financial services, no matter online or off-line, must comply with regulations. If someone stays out of oversight for too long, the chances of it disrupting financial stability will increase significantly.”

The central bank, in its first regulation of Internet financing, on March 14 blocked plans by Alipay and Tencent to offer virtual credit cards and payments using so-called Quick Response codes, citing security risks. The codes are black-and-white squares containing product or company information similar to bar codes that can be read by smartphones.

They're going to lose control of this eventually.  If Ali et al are able to offer credit card terms along with the current payments system, it will be Trillions moving out of banks, not Billions.  World War III won't be America and Russia or China, it's going to be a financial war:

Yu’E Bao and other money-market funds could raise banks’ funding costs by three to five basis points and reduce their profit by 1 percent to 2 percent in 2014, according to Barclays’s Yan. In five to 10 years, they could cut banks’ profit by as much as 17 percent, she wrote.

“Why is all the money going into Yu’E Bao? Because banks fail to pay what savers deserve. You can’t fool them,” Ma Weihua, a former president of China Merchants Bank Co., said during a group discussion at the National People’s Congress. “Yu’E Bao is forcing banks to face up to the challenges of interest-rate deregulation.”

The drain from the banks prompted Niu Wenxin, a managing editor and chief commentator at China Central Television, to attack Yu’E Bao in his blog on Feb. 21, drawing 11.5 million views and sparking nationwide debate.

“Yu’E Bao is a vampire sucking blood out of the banks and a typical financial parasite,” Niu wrote. “It didn’t create value. Instead it makes a profit by pushing up the whole society’s borrowing costs. By passing some teeny-weeny benefit to the public, it makes massive profit for itself and lets the entire society foot the bill.”

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