Yes, there is chance that Yu'ebao, as the first spokesman of Internet financing in China may eventually come off track and become as greedy as China's conventional monopolistic banks or a more horrible Wall Street regime. But, so far, that has not been the case. Instead, Yu'ebao has triggered a process of reconfiguration in the banking sector. Arising from its grassroots nature, it has three attractive attributes. Firstly and most importantly, it offers a return of around 6 percent, which is in sharp contrast to the 0.35 percent commonly offered by banks on current account deposits. It has cast the conventional banks into a role of robbers in the past several decades. This partly explains why ICBC and the Construction Bank of China have ranked among the global top ten in terms of market capital in 2011.

Secondly, the Yu'ebao Internet financing instrument does not pose any entry/exit barriers. It is open to 618 million Chinese Internet users, 500 million of whom are mobile Internet users. It allows deposit of as little as 1 yuan. Thirdly, it is highly interactive and intuitive, which makes it an experiential financing model. It has a natural focus on staging experiences. Users, no matter how humble their Yu'ebao deposit may be, can watch an amount of money flow in every day, murmuring to themselves: today, I have earned my breakfast. Blessed with these attributes, things quickly go viral and the Yu'ebao style of financing has spread like wildfire.

Conventional banks are feeling the heat. They are fighting back in many ways. At the beginning, no one defended the banks in the sphere of public opinion. No one had the gut to do so. That was natural. The public anger against the banks had been accumulating for many years and people were exhilarated to see banks being challenged. Against this backdrop, Niu Wenxin, carrying the title of editor in chief of the CCTV securities channel broke the silence and accused Yu'ebao of disturbing the market order and damaging the real economy by imposing a heavier cost burden on the banks. He is calling for the government to ban Yu'ebao and he is doomed to play a role of a public enemy.

How will the regulators respond? Internet financing has become a hot potato haunting the ongoing Two Sessions. When the head of the People's Bank of China, Zhou Xiaochuan, said that Yu'ebao would not be banned, he increased the public's confidence in the administration's promise to deepen reforms. Stories about Yu'ebao have increased in variety. For the majority, it is a long expected instrument that lightens up the shadows of the banking sector, though whether it will revolutionize the sector remains unclear.

The author is a columnist with China.org.cn. For more information please visit: http://china.org.cn/opinion/xupeixi.htm

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