Chinese internet goliath Baidu has formed a partnership to move forward into the financial sector and apply for a banking license.
The move comes from plans of Baidu establishing a store front for money market funds to which it requires to be a certified financial institution. Baidu joins other internet firms such as Tencent Holdings Ltd and Alibaba Group Holding Ltd by offering wealth management products this past year.
By offering interest rates higher than those offered by traditional banks, Buaidu, Alibaba, and Tencent have all attracted millions of investors. The interest rates offerd are subject to a cap of 3.3 percent for one-year savings.
“Of the businesses the Internet will topple they naturally include finance. Baidu is now applying for multiple banking licenses, including payment, but because we’re still in the process of applying it’s not convenient to reveal too much,” Baidu’s Chief Executive Robin Li said at China’s annual parliament this past Friday.
Alibaba started the non-bank affiliated finance trend by offering fund purchasing on its Yu’e Bao Taobao store. The initiative amassed over $65 billion in assets in less than 8 months according to the official Shanghai Securities News.
After Alibaba’s success, Baidu and Tencent followed suit and begun offering funds, much to the dislike of the Chinese banking sector. China’s banks have been lobbying for limitations to be set on online fund offerings by non-banking institutions.
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“What Baidu does at the moment is market financial products. This is just a more convenient way of selling currently available financial products to an audience,” said Li.
These non-financial institutions are able to offer these services by partnering with fund managers such as Tianhong Asset Management. Due to this, 3 state owned banks have halted activities with Tianhong Asset Management.
“We will promote the healthy development of Internet banking, improve the mechanism for coordinating financial oversight, keep a close watch on the cross-border flow of capital, and ensure that no systemic or regional financial risks occur,” Li added.
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