Juneyao Group, Alibaba finance arm to pilot new lending platforms

The China Banking Regulatory Commission announced on Monday that it has approved the launch of two new private banks in an effort to promote innovation models for the country's financial reform.

Back in July, the regulator gave consent to three such banks, which was considered a landmark effort for the government to open up the State-controlled financial market to private investors.

One of the two newly approved private lenders, MYbank, boasts the recently listed Alibaba Group Holding Ltd as a major founder.

Based in Hangzhou, Zhejiang province, MYbank has registered capital of 4 billion yuan ($651 million), with Zhejiang Ant Small and Micro Financial Services Group of Alibaba holding 30 percent of its shares. Other leading private companies such as Shanghai Fosun Industrial Technology Development Co Ltd under the conglomerate Fosun Group will hold 25 percent of its shares.

In a written statement sent to China Daily, MYbank said it will use the Internet as its major means of operation and will provide financial services and products with relatively simple structures to micro and small enterprises as well as individual customers on e-commerce platforms.

The bank will accept deposits of up to 200,000 yuan and offer loans of up to 5 million yuan.

Wu Qing, a financial researcher with the State Council's Development Research Center, has great expectations for the role Alibaba will play in China's banking system.

"Alibaba said it will set up a distinctive bank that operates nationally by relying on the Internet to develop financial services, rather than having many physical branches. The bank will explore the potential of big data and create a brand-new business model for banks, which may bring revolutionary progress to the banking system," Wu said.

Though doubting the reliability of big data, he thinks people should recognize the benefits of new technologies while being aware of the risks they may bring.

"We encourage Internet giants like Alibaba to explore big data and use it as a way to improve the company's risk management ability. Alibaba has already managed to control borrowing costs for small businesses. Now, it needs the guidance and help from the banking regulator to better contain risks," he said.

The other lender, Shanghai Huarui Bank Co Ltd, will see 30 percent of its shares held by Juneyao Group, parent of Juneyao Airlines, and 15 percent held by Shanghai Metersbonwe Fashion and Accessories Co Ltd.

With plans to register in the China (Shanghai) Pilot Free Trade Zone, the bank will build a financial service system that will cover settlement, investment, finance and transactions in the free trade zone.

Hu Bin, deputy director of the Institute of Finance and Banking at the Chinese Academy of Social Sciences, said private banks joining the market will change the structure of a banking system that is dominated by State-owned commercial banks and joint-equity banks.

"As competition gets more intense, banks will adopt different strategies. Unlike large commercial banks, private banks do not have a funding advantage. They must rely on the advantage of Internet technologies, which will differentiate them from other banks in ways that include early-stage clients, distribution channels and products," Hu said.

Hu said that although investors are eager to enter the financial sector, they should carefully observe the development of private banks.

"The banking system puts great emphasis on risk management and capital accumulation. In this sense, private banks do not start at the same level as the existing banks," he said.

Mu Chen and Meng Jing contributed to this story.

jiangxueqing@chinadaily.com.cn