Yu’EBao Reserves Reach 1.43T Yuan, Near ‘Big Four’ Banks

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Yu’EBao was holding nearly 1.43 trillion yuan at the end of June 2017, up nearly 80 percent from the 0.8 trillion yuan it held at the end of 2016, according to a new report from Alibaba’s Tianhong Asset Management. Its funds increased nearly 300 billion yuan by the end of June, up from 1.14 trillion yuan in the first quarter.

Yu’EBao is a value-added banking service offered by Alipay, Alibaba’s online payment platform, and Tianhong. It’s best known for its competitive interest rates. Users can make payments or transfer funds from their account at any time with no service fee. Tianhong was established in 2004, and Alibaba became its dominant shareholder with 266 million yuan after the launch of Yu’EBao.

The total reserves of Yu’EBao exceeded the sum of personal savings accounts and certificates of deposit held by China Merchants Bank at the end of 2016, and was close to the 1.63 held in similar accounts by Bank of China. According to China Merchants Bank’s annual report, the bank held 951.6 billion yuan in personal savings accounts and 332.9 in certificates of deposit at the end of 2016.

Based on the current rate of growth, funds managed by Yu’EBao are expected to surpass the total personal savings accounts held by Bank of China at the end of 2016 by the end of September.

Yu’EBao’s rising yields have attracted a lot of attention. Its seven-day annualized yield surpassed 4 percent on May 11 and increased to 4.05 percent on May 25.

The number of Yu’EBao users swelled to 325 million by the end of 2016. After witnessing a rapid increase in yields, these customers ramped up investment in Yu’EBao, which spurred explosive growth.

Recently, Tianhong announced Yu’EBao would cap individual investment at 250,000 yuan from May 27. The previous cap was 1 million yuan.

Tianhong said the change would preserve Yu’EBao’s function as a petty cash management tool and most users would not notice the change. Users who have invested more than 250,000 yuan do not need to withdraw the money and can still enjoy returns.

In mid-September 2016, Yu’EBao’s lowest seven-day annualized yield was 2.295 percent. However, the latest yield has grown 80 percent and to 4.178 percent.

Analysts said the surge in monetary funds was due to a substantial increase in yields since the first half of this year, especially in the second quarter.

Alipay is considered an indispensable product by many Chinese Internet users. Many users rely on Yu’EBao to manage, withdraw and spend their earnings. Such online firms are poised to reshape China’s traditional financial landscape.

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