Alibaba Group of billionaire Jack Ma was authorized by the Chinese government to expand capital for its online loan company. The move was designed to revamp the industry that split into controlled state banks and financing schemes.
According to the filing dated July 8, the Chinese Securities Regulatory Commission allowed the sale of notes worth more than CNY5 billion equivalent to US$815 million. The notes were all backed by Alibaba's loan program.
Three years ago, Alibaba started its microloans enterprise. Since then, it was already able to extend more than CNY100 billion of financing to around 320,000 online units and entrepreneurs.
Chinese regulators wanted to lessen the risks taken in the so-called shadow banking. They would enforce that products would be traded publicly. They would also squeeze access to funding. JPMorgan Chase & Co. estimated about CNY36 trillion worth of assets in the said kind of banking.
"The government wants something that is more effective," Macquarie Group Ltd.'s Hong Kong-based analyst, Victor Wang, said. "The loans that Alibaba offers are all for small and micro enterprises, which is something that the government wants. Traditional banks usually cater to state-owned enterprises."
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