The Economist: balance treasure "dangerous"-balance treasure Alibaba-IT news The Economist: balance treasure "dangerous"

When Alibaba launched the precious balance when people had high hopes, and rigid belief that the e-commerce company in China's banking industry to start a revolution. It did just that. Bao's performance, but this past quarter balance so people had to worry about, Bao has entered a relatively dangerous position balances: yields fall attraction no longer, more adventurous investment strategies.

▲ The balance left for the quarter above the treasure of different maturities of assets assets right amount Po flows to balance on the blue line, Brown line for the balance of the treasure the average duration of investment products

Balance Po is one year old, its enviable growth over the past year. Alibaba this money market fund was launched in June last year and February this year, Bao users reached 81 million balance. The FT noted that that number has exceeded the number 77 million active accounts in Chinese stocks. By the end of June this year, Bao size of funds under management, balance has reached 574 billion yuan, is China's largest money-market fund, is one of the largest in the world.

Bao popular simply because it balances. Government deposit interest rates capped, but the company effectively breached this barrier so that savers to direct the money into the investment banking market of interest rate caps. From the customer's point of view, their choice is clear: either put the money in the Bank, and one-year interest rate is only 3.3% or twice times more income even in balance treasure. Moreover, the balance treasure much more easy to deposit and withdraw money.

Last year, the balances Po managers are having a hard time. China's banking sector liquidity squeeze, interbank short-term deposits with high interest rates. It successfully balances the treasure has been a great help, because it can easily provide high returns and instant access. But starting from this year, the Central Bank steadily releasing liquidity into the banking system, money market interest rates declined sharply to 5% from 3%.

Balance Po was what to do about it? Just as pictured, it began to buy longer maturities. 2013 for three quarters, the balance Po 70% funds invested in products less than 60 days, but in the second quarter of this year, that proportion dropped to 43%. Meanwhile, the period of more than 90 days of product in their asset allocation ratio surged to 33%, representing an increase of 30% further in the first quarter. In other words, in order to continue to provide higher yields, balance treasure has begun to show signs of maturity mismatch. And this is an important cause of financial instability.

Not only that, but Bao is also beginning to invest more and more balance with repurchase agreements assets, China's banking sector, often through off-balance sheet loans of which invest in some high-yield product. First quarter balance treasure investment, the proportion of these products is 3.5%, soared to $ 9% in the second quarter.

CIMB (CIMB) evaluation analyst Trevor Kalcic says balance treasure "was more and more like the shadow banking"

Even adopted the above strategy, balance of yields on treasures still declining, as shown in the following figure:

Annualized yield on balances the treasure from more than 6% last year dropped to 4% per cent, only a bit more than the normal interest rates for bank deposits, and compared to the Bank's financial products are no longer attractive.

Now, savers began to seek other channels. Financial flows to balance Bao began to shrink. Quarter of 2013 and 2014 respectively 130 billion in the first quarter and balance of 356 billion yuan into the treasure, but plunged to 33 billion in the second quarter.

Jack Ma, Alibaba's founder, said last year that "If banks do not change, we will change them." In this sense, balance treasure did. Alibaba not only led other technology companies launch "class balance treasure" products, but also forced banks to introduce more investment products. In terms of pushing banks to become more competitive, he deserves your applause.

But if balance treasure yourself into a corner, applause can't last long.