An exchange of adjectives is probably triggering a much longer-term process. At the PCC’s Third Plenum last year, Secretary Xi Jin Ping elevated the market’s role in Chinese society, promoting it from “fundamental” to “decisive.” Monolithic until now, what’s happening to the banking system can be interpreted as an attempt at reform, albeit undefined and indirect. If the government doesn’t want to intervene—because of will or weakness—it plays the role of market stabilizer. At first, it launched procedures granting more freedom of action to forthcoming non-public banks, subsequently allowing large private companies to inaugurate the sale of financial services. The attempt seems to want to give Chinese investors greater freedom of choice. The population’s immense savings have been penalized until now by a ceiling on deposit rates set at 1.5%, independent of the amount paid to branches. Not surprisingly, huge amounts of money follow parallel avenues, from trust funds to shadow banking (a murky area with very opaque returns) to downright exploitation. All of this occurs in a socio-political context where equality and equity are still a mirage.
The phenomenon is causing losses and friction. Deposits diminishes by 1,000 billion renminbi last January, while banking authorities are pushing for the imposition of restrictions on new financial instruments capable of providing much higher returns than banks. The active companies are electronic giants, providing Internet services, online sales, and social media. The sector’s giant, Alibaba, controls 80% of Chinese e-commerce through its payment channels, and sells more products than Amazon and eBay combined. In 2013, “Single’s Day”—the Internet shopping day gratifying those not in relationships—recorded sales greater than USD$3 billion, the majority managed by Alibaba. The company recently obtained the China Banking Regulatory Commission’s (Consob or Chinese SEC) authorization to expand its range of financial products. The available money it controls is, therefore, immense. Less conspicuous but nonetheless important are the activities of Tencent, the holding from Shenzhen. Its messaging company, QQ, has 650 million users and recently started collecting private investments via smartphones, albeit in reduced dimensions. Other companies performing the most varied industrial activities have experimented in these new ventures.
This development is not worrisome because of its dimensions—bank deposits remain the dominant vehicle—but rather because its speed. Restricted, protected, opaque banks represent the old, home to occult interests. It’s not surprising that financial system reform in China keeps being postponed; it would penalize too many interests to be accepted only for the improvements it would entail. Novelty is symbolized by the individualism expressed online. Alibaba customers become savers and investors with the exact same channels that made them consumers. While the world basks in old privileges, society is learning new forms of revenge that Beijing seems to tolerate this time—and perhaps encourage—rather than repress. In the dynamics of globalization, and with the help of information technology, we might soon arrive at a personalization of finance so radical that it could do away with banking intermediaries.