"Yuebao," which literally means "leftover treasure" in Chinese, is the name of a new financial service that made its debut in China last year. It has succeeded in collecting money from individuals in excess of ¥8 trillion and has become a threat to major state-owned commercial banks like the Industrial and Commercial Bank of China. This service, operated by China's biggest e-commerce firm Alibaba Group, could open a crack in the Chinese economic system that has long been controlled by state-owned businesses and eventually imperil Communist one-party rule.
This service works this way: In China, where credit cards are not commonly used, Alibaba Group created a purchase settlement system known as Alipay, in which consumers deposit their money to pay for purchases made online. Since Alipay does not pay interest, people usually transfer the unused portion of their deposits to Yuebao, which in turn uses the money for short-term investment, paying depositors annual interest rates of around 6 percent — far exceeding that paid by banks.
Following the start of its service in June 2013, Yuebao's operations grew by leaps and bounds, collecting 500 billion yuan (about ¥8.1 trillion) from 86 million customers as of mid-March. The deposits are said to be still growing at more than 5 percent per month.
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