China Focus: Internet finance regains popularity amid volatile stock market

Internet finance is resurging following a bullish run that drew users investors away with the lure of bigger returns.

With several large Chinese companies announcing new programs and worries of fluctuation in the stock market, investors big and small are returning to the seemingly more solid Internet finance services.

Internet finance services like Yu'e Bao, one of the most popular started by e-commerce titan Alibaba, allow users to deposit savings or borrow money and are usually backed by one or several money market funds (MMF).

First cropping up in 2013, a drop in assets and yield rates pushed many users to invest in the stock market for better returns in the fourth quarter of last year.

But interest seems to be renewed after a string of big announcements.

On Monday, China's biggest homegrown smartphone maker Xiaomi launched its Huoqi Bao service, which allows users older than 18 years to make pocket-money sized deposits in an MMF run by investment firm E-funds.

Huoqi Bao's annualized yield rate was 4.92 percent on Tuesday and that of Yu'e Bao is 4.27 percent. Xiaomi is now offering bonuses and gifts to lure users.

"Although there are quite a number of Internet finance platforms, the burgeoning sector remains at an early stage," said Wang Anquan, head of Xiaomi's financial business branch, who worked for Alibaba's financial services.

One of the most popular domestic brands and host to the third-largest e-commerce platform, Xiaomi sold 61.12 million smartphones in 2014 and is now marketing smart wrist bands.

Xiaomi co-founder Hong Feng said his company has accumulated huge user data and knows their habits well. "Therefore, we can target them more accurately," said Hong.

Xiaomi's entry into Internet finance came after it lost the crown as China's top smartphone vendor to Apple in the first quarter of 2015.

"Huoqi Bao is just the beginning. We will roll out more Internet finance services," said Hong, without elaborating.

Last Friday, classified advertising site 58.com unveiled a similar service "58 Qiangui" (58 Till), promising yield rate of up to nine percent. Loan services are also being tested.

58.com went public on the New York Stock Exchange in 2013 and ample capital inflow enabled it to acquire 14 companies since then.

"Financial services will be one of our priorities," said CEO Yao Jinbo.

Many big names in the IT sector, including Baidu, Alibaba and Tencent, are already operating Internet finance services, drawing money away from banks with higher yield rates. But in the last several months, the hot stock market prompted many investors to withdraw their money from these services and bet on equities.

Combined assets of MMFs dipped 9.8 percent in the first quarter to 1.36 trillion yuan (222 billion U.S. dollars) at the end of March.

However, many stock holders are seeking safer investment over concerns of rising market volatility. The benchmark Shanghai Composite Index plunged over eight percent last week and caused many people great losses.

"I think it will be a trend for Internet-related companies to engage in financial services in the future as they have much more user information than traditional institutions," Zhang Qiang, a Shanghai-based industry observer, said.

Chen Jinqiao, a senior engineer with the Chinese Ministry of Industry and Information Technology, said companies should make fully use of the rapidly developing mobile Internet and advance in Internet finance. Endi