by CHRISTOPHER SCOTT
Jack Ma and Donald Trump pose after their meeting at Trump Tower in January. Ma has shown a shrewd sense of how he can help China’s leaders PHOTO/AFP/Timothy A Clary
Whether it be state-owned banks or old-school retailers, China’s tech giants have the blessing to lay waste to the old economy
Tech companies in China are playing an increasingly important role in the financial industry, widening their net into an ever more diverse set of services, and unless traditional banks and brick-and-mortar businesses can catch up, they are going to become increasingly irrelevant. Reform of state-owned enterprises and transformation of the old economy is going to come from the outside.
Alibaba is setting the pace for the massive disruption taking place. In the financial sector, Jack Ma’s company has already begun to tap into the boundless potential presented by Chinas’ middle class in the realm of wealth-management. The success of Yu’ebao, Alibaba subsidiary Ant Financial’s money market fund — the largest in the world — is just the tip of the iceberg.
Last month, Alibaba-backed, fintech-focused wealth management firm Yunfeng acquired MassMutual International’s Hong Kong unit. The cash and stock deal is a groundbreaking move, which underscores just how fast and furious Alibaba’s expansion into the financial sector is. The purchase will add insurance products to Yunfeng’s offerings.
“We see tremendous opportunities in Asia, but scale really matters and technology really matters,” MassMutual’s CEO said in an interview this week about the deal, through which MassMutual will retain equity interest. “We’re really excited about the wealth-management opportunities there.”
In April of this year, Yunfeng unveiled a robo-advisor app that would help the firm tap into potential demand from lower-income investors. The service, dubbed Youyu, lowers the cost of providing services to people with at least US$800 to invest by automating procedures such as risk-appetite assessment and know-your-client checks. At the time of the app’s launch, the firm hoped to attract tens of thousands of investors by the end of this year.
But Alibaba’s biggest splash so far in the financial services industry has been with the massively successful Yu’ebao, which overtook JPMorgan’s US government money market fund to became the world’s largest in April, after only four years of operation.
Despite years of lobbying from traditional banks to tighten regulations in areas such as money market funds, Chinese authorities are clearly supportive of the role these disruptive technologies are playing.
“Financial business on the internet is a new thing,” and regulators need to adapt… “but in general, financial policy supports the application of technology, so it needs to follow the footsteps of time and technology,” People’s Bank of China governor Zhou Xiaochuan was quoted as saying back in 2014, just as Yu’ebao was making its initial ascent.
In an interview with Stephen Engle of Bloomberg last Sunday, Ma explained one reason for Alibaba’s success dealing with regulators was the company’s proactive efforts dealing with authorities. “We always step ahead of the regulators – we have to. Otherwise, we go nowhere. But when you go ahead of the regulators, always there’s a painful thing.”
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