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Chinese Commercial Bank Profitability continues to struggle

Written by Kapronasia || February 27 2014

According to the latest figures from the China Banking Regulatory Commission (CBRC), Chinese commercial banks’ accumulated net profits reached 1.4 Triliion RMB in 2013, up 179.4 Billion RMB from 2012. However, the growth rate of net profits has been decreasing in recent years. In 2011, profits grew 36.33%, then dropped dramatically to 18.96% in 2012, and again in 2013 to 14.48%.

Research shows that the decreasing trend of Chinese commercial banks’ profitability growth rate seems to be in line with China’ declining GDP growth rate, shown in the chart below. It reflects that with the acceleration of interest rate reform and the influence from internet finance, China’s commercial banks profit margin faces continuing pressure.

Chinese Bank Profitability struggles

Yu'ebao AUM reaches RMB 400 Billion

Written by Kapronasia || February 21 2014

Yu’ebao had already made Tianhong Asset Management the largest one in the public fund industry in China in early 2014. However, the scale of Yu’ebao has continued to grow with the latest figures showing the AUM of Yu’ebao reaching RMB400bn on Feb 14, 2014, a leap of 60% compared to only one month ago. The speed of capital inflow is still accelerating in 2014. We may witness Yu'ebao becoming the largest money market fund in the world soon. 

The fast expansion of Yu'ebao crosses 400B under managementYue bao AUM data of Chinese money market funds, especially the ones leveraging Internet Finance, reflects the large wealth management demand potential of Chinese market and new innovative finance forms that will appear in the Chinese market in 2014.  

Shanghai Free Trade Zones showing signs of payment activity

Written by Kapronasia || February 20 2014

After what seems like forever, on February 18th, the regulators gave us a milestone reform for cross-border trade.

Competition for online finance cash increases in China

Written by Zennon Kapron || February 18 2014

Not satisfied with just taking deposits from banks, online finance platforms are facing more competition from each other.

Alipay's mobile payment business dwarfed PayPal's in 2013

Written by Kapronasia || February 12 2014

 

Over the past weekend, Alipay announced that it processed about US$150 billion in mobile payments in 2013 which is potentially more than PayPal and Square combined. PayPal cleared US$27 billion in 2013 and Square's number is not public, but likely far less than even PayPal's. 

Mobile Payment Transaction Value

That's a huge number and makes Alipay the largest mobile payments platform in the world. It wasn't really a question of if it would happen, but when. With over 300 million users and 100 million mobile users, Alipay's mobile payment growth has tremendous market scale which is part of the reason for the success of their Yu'ebao investment product that just seems to keep growing and growing... 

According to data from the China Securities Depository and Clearing Corporation Limited (CSDC), there were 261 new Qualified Foreign Institutional Investor (QFII) accounts opened in 2013 which represents about 43% of the total QFII account number from 2003 to 2013. Compared to 2012 figure. Number of QFII accounts rises by 129%.

So why are foreign investment institutions so interested in opening up accounts to trade the Chinese market when returns are so low? One reason is that the mainland regulators have been pushing towards more open markets and lowering the QFII requirements with the intent of introducing foreign capital to provide better liquidity in an anemic a-share mainland market. In addition to new accounts, more than $49.7 billion in QFII investment quota was approved in 2013.

The potential second reason is that foreign investors see potential opportunities in the mainland market either with current relatively low valuations or in the anticipation of future market growth if the market does pick up. 

 

New QFII account growth

Bitcoin in China 2014: Individuals

Written by Zennon Kapron || February 05 2014

As Chinese New Year wraps up and people (very!) gradually come back to work in mainland China, we wanted to take a step back and look at where we are with Bitcoin in China for the year of the horse.

Thank you to everyone who attended the Top-10 China Financial Technology trends webinar just over a week ago.

The sheer size of China's population and geography means that you get some pretty amazing statistics out of it. Couple that with increasing internet and mobile penetration and you have some pretty sizable numbers.

For decades, China has been known as the imitator and not the innovator. The argument goes that the West came up with social networking, mobile payments, group-buying, etc. and China imitated it, sometimes better, sometimes worse. C2C – copy to China. R&D – rob and duplicate. There are numerous terms to describe it. 

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