Alibaba and Internet Finance in China

Posted: 1 Apr 2017

See all articles by Hong Shen

Hong Shen

Carnegie Mellon University

Douglas Sicker

University of Colorado at Boulder - Department of Computer Science; University of Colorado at Denver

Date Written: March 29, 2017

Abstract

With the official promulgation of the “Internet Plus” plan in 2015, China has opened up many of its previously tightly regulated industries for private Internet companies to enter, including the strategic banking and financial sector – a sector that has long been dominated by state-owned banks. China’s e-commerce giant Alibaba, relying upon its large collections of consumer and business data, has been one of the pioneers in this front. The company’s efforts in articulating with state’s initiatives to aggressively expand its reach into China’s financial industry, however, has not been a smooth process. The security concerns of different government agencies, the vested interests of large state-owned banks, and the company’s own extensive linkage with transnational capital have continued to create frictions.

Drawing on a systematic review of state policies, corporate documents, trade journals, and news articles, as well as interviews with industrial practitioners in China, this paper offers a case study of Alibaba’s recent entry into China’s strategic financial sector. By focusing on three highly visible cases in Alibaba’s new adventures – the Alipay drama in 2011, the Yu’ebao dispute in 2013 and the establishment of the Internet bank MYbank in 2015, it provides some preliminary observations of the complex state-capital interactions that have structured China’s digital revolution during the “Internet Plus” era.

This paper argues, if the Yu’ebao dispute in 2013 indicates that there were divergent visions and serious power struggles inside the state apparatus in terms of how to build an Internet-based financial sector, the still-limited business scope of MYBank in 2015 reveals the tensions between the security concerns of the Chinese state and the expansive objectives of its domestic Internet companies. Moreover, the drama around Alipay, and the more recently released Foreign Investment Draft Law, have further complicated the issue as the Chinese state seems to have started to curb the influence of transnational investment in its domestic digital market.

As the “Internet Plus” initiative continues to grant private Internet companies unprecedented freedom to operate in many of China’s most strategic and sensitive industries, Alibaba’s recent Internet finance adventures – as analyzed in this paper – offer revealing policy insights into the ongoing and future restructuring of China’s digital economy.

Keywords: China, Internet Finance, Internet plus, Alibaba, Case Study

JEL Classification: L86

Suggested Citation

Shen, Hong and Sicker, Douglas and Sicker, Douglas, Alibaba and Internet Finance in China (March 29, 2017). Available at SSRN: https://ssrn.com/abstract=2943190

Hong Shen (Contact Author)

Carnegie Mellon University ( email )

Pittsburgh, PA 15213-3890
United States

Douglas Sicker

University of Colorado at Boulder - Department of Computer Science ( email )

Boulder, CO
United States

University of Colorado at Denver ( email )

Box 173364
1250 14th Street
Denver, CO 80217
United States

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