Online funds tempting investors

P2P platforms are proving popular but they face strong competition from other Web products

Online investing has been hailed as the next big financial trend. It might well be.

Money market funds and peer-to-peer lending, which help small businesses expand or set up new ventures, have become popular. Many see them as an alternative to a bank savings account or investing in stocks.

“We witnessed a rapid increase in online wealth management products last year. This has made the process of wealth management easier and more transparent,” Wang Tao, an analyst with China Internet Network Information Center, said.

Ordinary investors can put in as little as 10 yuan ($1.6) or as much as 1 million yuan into money market funds, which specialize in bonds and oneyear fixed bank deposits.

The average annual return on 2,000 yuan is around 90 yuan, depending on the interest rate. If you put the same amount into an ordinary savings account with a traditional bank, the return will be just 65 yuan.

“I moved to online investment platforms late, so the yield is not as high as it was before,” Yan Tao, a human resources manager at a multinational consumer goods company in Shanghai, said. “But it is quite easy to handle and still provides a higher margin than an ordinary bank deposit account.”

Money market funds have become extremely popular online, especially on the Yu’ebao platform, which is part of the Chinese Internet giant Alibaba Group Holding Ltd. Another leading e-com-

Wang Tao, an analyst with China Internet Network Information Center merce player, JD.com Inc, also specializes in similar products.

In the first quarter of this year, Yu’ebao’s money market fund climbed by more than 132 billion yuan to reach 711 billion yuan, an increase of 31.4 percent compared to the same period in 2014. The platform also has 185 million registered users.

But money market funds are not the only products on offer. The P2P lending sector has mushroomed with the boom in smart technology.

Last year, there were about 1,200 Chinese P2P lending companies, including big-hitters such as CreditEase Corp, Shanghai Lujiazui International Financial Asset Exchange, and the Shenzhenbased Hongling Capital.

“In 2014, the turnover of Chinese peer-to-peer lending platforms reached 321.19 billion yuan, up 268.83 percent compared to 2013,” a report released last month by the Payment & Clearing Association of China highlighted.

This year, industry statistics show the total trading volume on P2P online platforms topped 60.9 billion yuan in May, up 10.55 percent from a month earlier. The overall yield rate, or profit, increased by 8 basis points to 14.54 per- cent in May, but that was still down on last year’s 19.6 percent.

“We have noticed that venture capital has accelerated on the P2P market since the beginning of this year,” Yang Shuoyu, chief executive officer of the Shanghai-based P2P company Baotuodai.com, said. “Increased capital will help develop the P2P industry.”

But the online market has suffered problems such as fraud, leaving investors out of pocket. Last month, up to 59 platforms reported difficulties mainly connected to “improper investments”.

“Quite a few P2P platforms have been shut down,” Wang Suzhen, deputy secretarygeneral of Payment & Clearing Association of China, said. “Some were just to set up as fraudulent enterprises. But tougher regulations and credit systems will soon be in place to stop this from happening.”

Leading online companies are also playing their part by increasing investor protection.

CreditEase Corp reached an agreement with China Guangfa Bank earlier this month to help safeguard investors on Yirendai.com.

Set up in 2012 by China’s leading P2P lending and wealth management company, Yirendai has 4 million registered users with a trading volume of more than 5 billion yuan.

Its risk reserve fund is valued at almost 100 million yuan and the deal by CreditEase Corp means that China Guangfa Bank will oversee supervision of settlements for investors and borrowers.

“This kind of agreement is ideal for China’s booming Internet financial market by safely managing the risk to investors,” Tang Ning, founder and chief executive of CreditEase, told China Daily last month.

We witnessed a rapid increase in online wealth management products last year.”

LONG WEI / FOR CHINA DAILY A man uses his smartphone to scan a Alipay two-dimensional code for payments at the first unmanned supermarket in Hangzhou, Zhejiang province. Online payment and investment have become more and more popular among Chinese people.