Alibaba moves to Finance, making alliances with China Minsheng Bank and buying 51% Tianhong Asset Management

When Jack Ma, founder and chairman of e-commerce giant Alibaba Group, vowed in 2008 to change the banking industry, the public was just beginning to understand his idea of a Net-based financial ecosystem.

Now the firm is offering small loans, securities investments and payment services. It has also ventured into insurance by co-founding a company to sell policies and settle claims online.

Few would argue that even the large banks have felt pressure to broaden and improve their services. Privately, many bankers and analysts say that the only barrier to Alibaba becoming a real bank is a license.

The alternative that Alibaba is developing allows customers to prepay sellers for their purchases at a discount, sparing the latter the need to borrow from banks and hold inventories for a long time, the executive said. The customer-to-business (C2B) mechanism has gained ground on Alibaba's popular e-commerce websites Taobao.com and Tmall.com.

As in other services available on Alibaba's platform, data mining is all that matters in terms of discovering business opportunities and controlling risks, the executive said.

The emphasis on data has also played an important role in Alibaba's recently announced cooperation with China Minsheng Bank. The two signed a cooperation agreement in September, saying that they will jointly explore areas including wealth management, direct banking and credit card services.

A report by Haitong Securities says Alibaba is easing into the banking sector through such cooperative deals in which it provides the partner financial institution customers and distribution channels in return for financing and risk management expertise.

Some bankers argue that the threat from Alibaba to the banking industry has been overplayed. Their confidence stems partly from the belief that cooperation alone does not teach banking. More importantly, many doubt that what made Alibaba's financial services successful online work equally effectively in the real world.

"Both of the company's strength and weakness lies in its platform," an investment analyst familiar with Alibaba said. However extensive the company's financial services can be, they are limited to the e-commerce platform because outside the system it has gathered little data to help evaluate borrowers' creditworthiness and make lending decisions.

Minsheng's Lin said he is not worried about Alibaba getting a banking license either because with the license it will have to comply with tougher requirements on capital and liquidity that will make expansion in the real world much harder than online. Cooperating with Minsheng, on the other hand, will benefit both sides because they can jointly provide better services to more people, he said.

Some critics have wondered whether Alibaba is strong enough to compete against banks even online. Its investment service, Yu E Bao, may have rapidly soared to fame thanks to Alibaba's huge client base – in less than two months after it was launched in June, users have put more than 20 billion yuan in their accounts – but there are reasons to doubt the success will last.

One of them is Alibaba's inability as a non-financial institution to borrow funds from the central bank and the interbank market to smooth out liquidity fluctuations in Yu E Bao investments.

The ease with which people can transfer money between their Yu E Bao and bank accounts has also been criticized. Some say it misleads investors by not warning them enough about investment risk.

Some have suggested that Alibaba's success in financial business owes in part to regulatory gaps. For example, unlike financial institutions including banks, the securities regulator does not send inspectors to Alibaba for on-site assessment regarding its operations related to securities investment.

But this is about to change. Alibaba's domestically incorporated subsidiary, Zhejiang Alibaba E-commerce Co., has proposed spending 1.18 billion yuan acquiring 51 percent of Yu E Bao's manager Tianhong Asset Management. If the deal succeeds, as the majority shareholder of a fund company, Alibaba will face the same requirements as applied to financial institutions.

The China Securities Regulatory Commission (CSRC) has never allowed a non-financial institution to hold the majority stake in a fund management company. But the new Securities Investment Funds Law, effective June 1, says a controlling shareholder can be any company with good financial operations record.

Source: Caijing

China:"Long-lasting Housing Mechanism" to Surface in Nov.’s Third Plenum

The Chinese government is expected to announce a "long-lasting housing mechanism" due in November at a key gathering of party members, according to media reports.

The Ministry of Housing and Urban-Rual Development has already finalized opinions ready to submit to the central policy-decision organ, the official said.

Property magnates were also included in the round of opinion-solicitation, according to the 21st Century Business Economic Herald. Ren Zhiqiang, chairman of Hua Yuan Real Estate Group, reportedly said big changes had been made several times before the final draft came out. 

Despite the absence of official leak-out, Hu Jinghui, Vice President of BACIC-515 Property Agency, told AAstock that there was a basic market standing about where the polices would go. The "long-lasting mechanism" will mainly involve rural lands coming to market, legal moves in social security homes and the extension of a property tax, among others, Hu said.

A second source close to the MHURD said that new property moves would be related to policies in direct property financing, land supply system, and the construction of social security houses.

The extension of the property tax, which has been enacted only in Shanghai and Chongqing so far, is expected to be at the center of policy discussions, the report said.

Chances are "very big" for the expansion of the tax, said Zhao Luxing, a director of the policy research center of the MUHRD, said in an earlier interview with AASTOCKS.

According to Hu, the property will be extended in both "width and depth". The expansion of the tax to more cities seems inevitable, he said; but the possibility of a "dilatation" of the tax is great.

Hu expected that the current rise of housing prices could be somehow curbed under the new mechanism. The government may also change its perception in housing controls, like a shift from dampening demand to increasing housing supplies, he added.

China has put in places many measures to control the sizzling sector in recent years, but they don't seem to have delivered much effect. Chinese home prices rose for the 16th consecutive month in September, with a monthly increase of 1.07 percent in 100 cities, according to data from the China Index of Academy. In the same month,land salEs in ten of China's major cities hit a 33-month high, statistics from real estate company E-House showed.

Source: Caijing

An Unthankful US Deal

Instead of defusing the time bomb of a historic debt default, the United States has come up with a last-gasp deal to only fund its government until Jan 15 and raise the debt ceiling until Feb 7.

This might be the best what US politicians could provide at the moment. But it is certainly not what is aspired for by millions of Americans who have suffered because of the political debacle and many foreign debt-holders who are worried about the safety of their US investment

US President Barack Obama was right to say that US leaders needed to "earn back" the trust of the American people in the aftermath of the crisis. Yet no less urgent is the task of the world's largest economy to restore its reputation as an economic safe haven.

If concerns that crisis-driven politics has become the "new normal" in Washington cannot be immediately addressed, there is little chance for the US economy to emerge out of the great financial crisis that the Lehman Brothers' bankruptcy triggered five years ago.

The Congress deal on Wednesday offers a temporary fix to pull the US economy from the brink of a catastrophic debt default that could have devastated the global economy. The deal, in all fairness, fails to address the root cause of the US' long-term fiscal troubles.

Washington's political dysfunction is the apparent reason why international investors doubt its ability to honor its signature. It is the fast-growing debt that has been eroding global confidence in the US government's capability and commitment to do so. Even its unprecedented, massive monetary stimulus program has pressed down borrowing costs for long.

The stopgap plan has also set up a forum of US politicians to negotiate a more permanent budget deal while leaving open the possibility of another bitter budget fight and another government shutdown early next year.

Source: Caijing

Beijing to Unveil New Policies to Shore up Foreign Trade

The Ministry of Foreign Trade remains optimist about this year's foreign trade outkook despite the negative growth reported in exports last month, the spokesperson said Thursday at a press conference.

The Chinese government is going to introduce more supportive policies to shore up the country's foreign trade which is slowing down amid depressing demands from emerging markets.

China has unveiled a couple of favorable policies since July to help Chinese trade companies ease pressures of rising costs and improving efficiency, said Shen Danyang, spokesperson with the Ministry of Commerce.

A plan to promote cross-border e-commerce has just been released, he said.

More supporting efforts are on the way, according to Shen, including a comprehensive supporting package as well as measures to upgrade the industry's growth momentum.

The ministry remained upbeat about this year's foreign trade outlook despite the negative growth reported in exports last month, the spokesperson said Thursday at a press conference.

Shen was confident in completing 2013's target of an 8 percent year-on-year growth as well as a trade "transformation".

China's exports fell 0.3 percent in September from a year ago, compared with a 7.2 percent year-on-year growth in August. Imports, by contrast, grew by 7.4 percent.

He expected imports to continue growing strongly in the following months.

China still faces challenges in as international environment stays complicated with growths of emerging markets slowing down, currencies plunging and inflations climbing. 

Source: Caijing