09/29/2014 - China’s Financial Repression and Alibaba’s Finance Plans
Forbes posted essay on the emerging clash between the plans of Alibaba to develop their financial offerings in China & the Chinese state policy of financial repression .. Alibaba’s plans are to expand their offerings in the financial sector include offering loans at 5.5% .. China has a deliberate policy of financial repression forces savers to buy property, buy life insurance or deposit money into a bank account . the savings deposit rates are very low, typically 1% .. inflation is higher than that, so depositors are losing money by depositing .. “Financial repression is not bullying people into giving you their money, it’s restricting options so that interest rates stay low. And as I say this is a deliberate public policy in China, to ensure that interest rates do stay low by limiting those savings options .. All of which makes this a most interesting little scenario. The current financial repression means that if Alibaba is able to continue with its plans then it will have a very successful product on its hands. But of course, there are those who benefit from the current repression and will they allow them to continue? In the long run the end of those limitations upon how the Chinese may save will benefit everyone. And they’ll almost certainly happen as well, in that long run. The question is going to be well, what happens in the short term?”
