The Internet Finance: A booming sector in China’s economy
The Internet finance, also known as the online finance, is a new financing model that takes the advantage of the Internet or any other IP networks. In China, the dramatically growing Internet finance opens up a revolutionary means of financing other than resorting to the capital market or conventional banks. In this paper, I will firstly examine the development of Internet Finance in China through representative a Chinese company——Alibaba, to explain why this innovation has gained so much popularity. Then, I will analyze some rising problems as well as the possible solutions to them.
Generally speaking, the rapidly growing Internet finance in China is driven by two main trends. First, the mergence of Internet companies into the financial sector. Second, the transformation of financial services from tangible into online. As China’s biggest e-commerce company, Alibaba launched Yu’E Bao in June 2013. Literally translated as “leftover treasure”, Yu’E Bao is a fund management platform under Alibaba's Alipay, China's largest third-party payment platform. Yu’E Bao allows Alipay’s customers to invest their idle account balances into a money market fund managed by Tianhong Asset Management Co (Jingu 1), which is a typical form of the Internet finance. Launched less than one year ago, Alibaba’s Yu’E Bao has attracted more than 81 million investors by the end of February 2014, a figure that represents an increase of almost 20 million users within half a month. By comparison, China’s A-share market boasts about 67 million investors after 23 years of development (Moran). Alibaba’s fund currently has over $40 billion in assets under management, making it the bi...
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...eting strategies all contribute to this growing. However, the critical problems of it, such as restrictions over the capital flow set by bank, lack of inspection of information security and risk control, as well as the unsustainability of high returns, have asked for more regulation
Bibliography
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On December 14, 2006, Cisco invested $50 million in China communications services, one of the biggest overseas strategic investors of China communications services. After becoming a shareholder of China communications services, Cisco and China communications services managed telecommunications services and new network solutions for China enterprises including IP infrastructure, digital video, 3G platform and its application. In November 2006, Cisco (China) Financing Lease Co. Ltd was established in Beijing and became the first network equipment company of China to provide long-term financing lease finance solutions for customers (Liang, R. 2013).
Cheap and efficient trading is what securities traders wanted and that is what they got. Volumes transacted saw unprecedented increases, with the average daily number of trades going through the ceiling”(1.) This attests to the idea that with the advances made in technology today, Wall street will not be able to keep up. The “nerds” of society will be able front run the stock market and make more money in seconds than anyone could ever imagine.
China has come to the forefront of the international finance scene following the East Asian financial crisis for two reasons. First, the post reform Chinese economy closely resembles the other East Asian countries. China experienced significant levels of growth led by exports, with a rapid expansion in labor-intensive exports in its early stage of development. Rapid growth was accompanied by a rapid increase in domestic savings and massive inflows of foreign capital (Perkins, 1986). The banking sector dominated financial intermediation and the ratio of non-performing loans was high. Estimates put non-performing loans at China's four leading banks at 25 per cent -- far higher than in South Korea or Thailand before they fell prey to the Asian contagion. Would China be the next victim of the crisis? (Dornbusch, 1997).
Morrison, Wayne M., and Marc Labonte. "China's Holdings of U.S. Securities: Implications for the U.S. Economy." Federation of American Scientists. Federation of American Scientists, n.d. Web. 13 Jan. 2014.
Ross, S.A., Westerfield, R.W., Jaffe, J. and Jordan, B.D., 2008. Modern Financial Management: International Student Edition. 8th Edition. New York: McGraw-Hill Companies.
In 2000, China had yet to develop any e-commerce applications, and had only 2.1 million total internet users. Payment systems and physical delivery mechanisms to facilitate the development of e-commerce transactions were well-developed in other markets, but were simply lacking in China.
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Interests: The sooner it could distance itself from its American roots by adopting “.cn” domain, the sooner it becomes a member of “in-group” in Chinese cul...
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