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How does Alibaba respond when China cracks down on investment products? It launches another investment product.

Chinese tech giant Alibaba rolled out its second investment-themed offering today, and it’s probably not what followers of the company expected.

Inside the Taobao mobile app, Alibaba has introduced a new section called “Yule Bao” (rough translation: “entertainment treasure”). Yule Bao lets users “invest” money in a range of high-profile and development-phase games, movies, and TV shows, in exchange for “expected annualized returns” of 7 percent. Users who help crowdfund these projects will be eligible to receive certain perks. For example, an “investor” might earn the chance to visit the set of the movie he or she supported, or receive an autographed poster from the film’s director.

Investments in film and TV projects are set at a minimum of RMB 100 (about US$ 16), while investments in gaming projects can’t go lower than RMB 50 (about US$ 8). Each user can make a maximum of two investments in each project. According to Alibaba, management will be carried out by Guohua Life Insurance, which will place the money in its own set of wealth and insurance funds, and subsequently will be invested in the entertainment industry.

Alibaba adds that it also hopes to increase fan interaction with creators, and allow fans to contribute directly to the development of each project. Liu Chunning, president of Alibaba’s digital entertainment business group, provided the following statement:

“The influence of Internet innovation on the cultural industry is no longer restricted to movie ticket sales but has expanded to investment and content production. Yu Le Bao aims to provide a grassroots investment platform to bring the public closer to the cultural industry. In the future, public investors will even be able to select the directors, heroes and heroines of a movie or TV show.”

In short, it’s like Kickstarter-meets-Yu’ebao, Alibaba’s consumer investment fund. Launched in June 2013, that product went on to become China’s single largest fund of its kind, with total assets of over $41 billion as of last January.

Kickstart my heart

Since these “investments” are more like crowdfunding-esque donations, Yule Bao is more of a ‘fun’ product than a true ‘fund’ product.  Yu’ebao has replaced traditional bank accounts for many Chinese consumers – Yulebao won’t be doing that anytime soon.

Yet, as is often the case with Chinese tech developments (and political ones as well), the timing of this announcement is more important than the announcement itself. Alibaba’s introduction of Yulebao – a not-so-serious investment product, but an investment product nonetheless – comes right in the thick of the company’s kerfuffle with the People’s Bank of China. The state’s central bank recently proposed a set of regulations that will impose ceilings on online monetary purchases – with single purchases capped at RMB 5,000 (US$815), and monthly purchases capped RMB 10,000 (US$1,630). Those caps include money transfers into investment funds like Yu’ebao.

(See: China reportedly considering tough regulations on online payments)

Alibaba chairman Jack Ma has always been outspoken about his desire to provoke reform for China’s consumer banking regulations, and he’s been just as vocal now that the People’s Bank of China hinted at an upcoming clampdown on financial products offered up by the tech giants. Last week Ma posted a message on Laiwang, Alibaba’s messaging app, in which he wrote “Let the users decide who wins the game, not monopoly and power.”

As a result, despite how Yulebao’s rooted in entertainment moreso than finance, don’t write it off entirely. By launching an investment-themed product just as the People’s Bank of China hinted at an upcoming crackdown on investment product, Ma is telling the People’s Bank of China – “Yes, I know about your crackdown, and I don’t care.”

(See: Jack Ma’s Last Speech as Alibaba CEO)

Editing by Willis Wee



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