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This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License
Article
Risk and Regulation of Chinese Online Investment Products
Author(s)
Jingjing Yang
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DOI:10.17265/1537-1506/2017.05.002
Affiliation(s)
Guangdong University of Foreign Studies, Guangzhou, China
ABSTRACT
The emergence of Yu’E Bao and
the like provides Chinese investors with a new and flexible investment option. Such
new investment instrument forces up the cost of capital of local banks and also
takes away the market share from them. Yu’E Bao has allocated most investments in
inter-bank money market due to the liquidity concerns. This study investigates Yu’E
Bao’s portfolio allocation and potential risk, and also provides policy implications
for regulators. The research findings suggest that regulators should issue more
provisions to further regulate the operation of online investment products and keep
the liquidity risk under control, i.e. require money market funds to hold more capital
in reserve on a gradual basis. By examining the case of Yu’E Bao, a new online investment
product in China, this study sheds light on the recent financial development and
reform of China.
KEYWORDS
Yu’E Bao, online investment, money market fund, financial reform, government regulation, China
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