Allied with Taobao and other online marketplaces, Chinese money market funds such as Yu’ebao are making inroads into markets traditionally dominated by banks (see previous Danwei post). Not only are these fund products more accessible for Internet users, their interest rates, usually hovering around 5%, are more than ten times the 0.35% offered to most current account holders.
Feeling the pain, banks are fighting back. The webportal China Finance Information 中国财经信息网 reported on November 12 that China Minsheng Bank has been conducting tests to prepare for a December release of a new type of bank card that promises to offer interest rates on a par with most money market fund products. This move is being hailed by the banking industry as “the first shot of a counterattack” against upstart online financing.
The CFI article quotes the Q3 results of several banks indicating a slowdown in growth rates for deposits. Among them, China Merchants Bank, CITIC, and China Minsheng Bank achieved growth rates of 0.25%, 0.71%, and 0.26%, respectively.
Companies and brands affected
China Minsheng Bank (HKG:1988; SHA:600016)
China Merchants Bank (HKG:3968; SHA:600036)
China CITIC Bank Corp. Ltd. (HKG:0998; SHA:601998)