Free stock app Robinhood reveals its secret for getting into China

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In April, the US-based stock trading app Robinhood announced its plans to enter mainland China. What it didn’t say, though, was how it was going to pull that off.

The company has now announced more details on its entry – and it involves a deep partnership with Chinese search giant Baidu.

Robinhood’s commission-free stock trading will be built directly into Baidu’s StockMaster app under its Chinese name, Luobin Xia (罗宾侠). Think of your iPhone’s Stocks app, if it also had a “Buy” button. StockMaster users can make a Robinhood account within the app today and then dive headfirst into the US stock market.

Playing with fire

There’s a reason why foreign financial services startups tend to stay away from China – it’s a hyper-competitive market with complex and often unpredictable regulations.

Robinhood may manage to outfox the competitive side, as it has a unique offering – allowing Chinese citizens to invest on the American stock market for free. This cuts through currency converters, stock brokers, and a thousand other middle-men who would typically stand between a PRC citizen and a share or two of Apple. Robinhood isn’t completely alone in this space, though – Hong Kong-based 8 Securities offers a similar service that also includes an AI-based financial adviser.

Whether Robinhood can outsmart China’s regulators remains to be seen.

But whether Robinhood can outsmart China’s regulators remains to be seen. Partnering with a strong local player like Baidu is certainly a bulwark against abrupt censorship or government interference, but the US company is stepping on a lot of toes.

China’s investment regulations are full of gray areas, which can be great for a company that’s just getting started and is comfortable with a bit of insecurity in exchange for flexibility. But if a few million PRC citizens start dumping money into US stocks, you can bet that gray area will turn to black or white pretty quick (and there’s no guarantee which side it’ll be).

It also doesn’t help that the company is launching while China’s government is cracking down on money flowing out of the country. And partnering with Baidu, while a great way to gain a large audience and some domestic legitimacy, also means the company won’t be flying under the radar.

But if Robinhood can pull off its regulatory hat trick and go legit (or at least unimpeded) in the mainland, the potential audience is massive. I’m no investment genius [disclosure: I have a Robinhood account, and have used it for investment – at present, I have lost a grand total of US$7.32]. But opening up the world’s biggest market to invest in the likes of Apple, Alibaba, and Disney could spell big news for both Chinese citizens and US investors.