China's Alipay Investment Service Is Booming

It is not a coincidence that Alipay was allowed to battle for customer deposits just as China's cash crunch got underway.

Net Users Flock to Yu E Bao Despite Regulatory Hurdle
The service, jointly launched by Alibaba Group's online payment unit and Tian Hong Asset Management Co. on June 13, had 2.5 million registered users by June 30, Alipay and Tian Hong reported.

Also on that date, the annual return for investors was 6.192 percent. That for one-year bank deposits was about 3.25 percent.

However, on June 21, the China Securities Regulatory Commission said the service violates fund management rules because part of it had not been registered with regulators.

The commission has required Alipay to submit extra documents for registration or risk punishment. Both Tian Hong and Alipay have said the service will continue to operate and they will meet regulatory requirements as soon as possible.
If the banks had enough power, they would have this service shut down. CSRC is part of the PBOC's regulatory arm though, and they are unlikely to shut down 余额宝.

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