This fintech startup is helping Chinese people move their money abroad

Photo credit: f11photo / 123RF.

Every year, hundreds of thousands of Chinese students leave their country to study abroad. While overseas, they pay tuition, buy books, eat at restaurants, and pay rent. All of that requires one crucial step: moving Chinese yuan out of China.

“A lot of people are doing offshore financial planning because they’re going to have future liabilities denominated in US dollars or euros or pounds,” Weber Su, co-founder of fintech startup Niu Jiao Suo, tells Tech in Asia. That includes not only Chinese parents who want their children to study abroad, but also those who want to buy overseas property or “travel around the world in five years,” he says.

“We usually target this group of people,” he adds.

Since China’s sharp yuan-devaluation in 2015, about US$1.2 trillion has left the country.

The Beijing-based startup, founded early last year, has picked one hell of a time to start helping Chinese investors move their money abroad. Since China’s sharp yuan-devaluation in 2015, about US$1.2 trillion has left the country, according to Bloomberg Intelligence. In response, the Chinese government has tightened capital controls, especially over the past year as China’s annual GDP growth slows to below 7 percent.

Restrictions on insurance products, mergers and acquisitions, and even bitcoin are all part of the government’s capital flight crackdown. For instance, there’s a US$50,000 limit on foreign currency per person per year in China.

However, that isn’t stopping Niu Jiao Suo, which connects Chinese retail investors or individuals with overseas mutual funds. Through the company’s app, users can invest in overseas funds of their choice, such as BlackRock, JP Morgan, and Franklin Templeton. The minimum investment amount is US$400. The upper limit, of course, is US$50,000.

Husband and wife co-founders of Niu Jiao Suo (left to right): Angeline Cai and Weber Su. Photo credit: Niu Jiao Suo.

“It actually gives us more attention, because all of a sudden you have a US$50,000 quota, renewed annually,” says Weber, explaining the impact of China’s capital controls. “That just conveys to an ordinary person that the quota is valuable. If you don’t use that it expires.”

In addition, Weber says, limits on capital outflows are incentivizing prestigious overseas funds, such as BlackRock, to consider small players like Niu Jiao Suo. “They’re targeting [China Investment Corporation],” he says, referring to a massive Chinese sovereign wealth fund. “Safe. The big players. If they have time, they go to the insurance companies – those can write really big tickets.”

“But due to the foreign exchange controls, even if they obtain really good sales leads, it doesn’t really lead to sales,” he explains.

To attract funds, Niu Jiao Suo bundles the small investments made through its app into a larger package. That’s transferred to asset managers once a day.

Caution ahead