Alibaba Affiliate Wins Approval to Start Private Bank
An advertisement for Alipay in the Myongdong shopping district in Seoul, South Korea, this month. South Korea is experienced a surge of Chinese tourists during the Mid-Autumn Festival holiday. Zuma Press
BEIJING—Alibaba Group Holding Ltd.'s online-payment affiliate won approval from Chinese authorities to establish a private bank, regulators said Monday, as the e-commerce giant moves further into financial services.
The China Banking Regulatory Commission said it gave approval to start a bank to the parent company of Alipay, which processes e-commerce payments and is crucial to Alibaba's operations. It said the bank would be headquartered in Hangzhou, the eastern Chinese city where Alibaba is based, and the Alipay arm will own a 30% stake.
Alipay is controlled by Alibaba Executive Chairman Jack Ma. Alibaba and Alipay representatives didn't respond to requests for comment.
Setting up a bank would allow Alipay to collect deposits and give it greater freedom to offer other bank-like services. Alipay still must win a bank license from regulators before the bank can open.
Alibaba is the latest company outside the financial sphere to win approval to start a bank in China. Beijing hopes private banks will help in its drive to open up the economy to more competition and get private capital to more parts of the economy. Critics have complained that China's big state-run banks don't serve all parts of the Chinese economy equally, favoring big state-owned firms.
Alibaba and rival Tencent Holdings Ltd. TCEHY +0.62% Tencent Holdings Ltd. ADS U.S.: OTC $15.11 +0.09 +0.62% Sept. 26, 2014 8:10 pm Volume (Delayed 15m) : 176,478 AFTER HOURS $15.10 -0.01 -0.04% Sept. 26, 2014 4:00 pm Volume (Delayed 15m) : 207,710 P/E Ratio 42.59 Market Cap $142.38 Billion Dividend Yield 0.20% Rev. per Employee $417,954 09/29/14 Alibaba Affiliate Wins Approva... 09/24/14 Tencent Raises Stake in Mall D... 09/24/14 Corporate Watch: News Digest More quote details and news » TCEHY in 
Your Value Your Change Short position , which won permission to open a bank in July, already offer consumers deposit-like investment products with returns higher than available from plain-vanilla bank savings accounts. The money-market funds behind the investment products so far have attracted more than $65 billion. Banks have criticized that development, saying the new investment offerings need to be more tightly regulated.
The CBRC said Shanghai Fosun High Technology (Group) Co. will hold a 25% stake in Alipay's bank.
The CBRC also said Monday that it had approved the establishment of a private bank by Juneyao Group, which controls Shanghai-based Juneyao Airlines. Juneyao Group will take a 30% stake in the bank.
—Grace Zhu
