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28 March 2014
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Chinese E-commerce Giant Alibaba Launches Movie Investment Product

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''Hey, brother, have you invested in Zhang Ziyi?''

Alibaba

So begins a cartoon advert referring to Zhang, an actress, for the latest retail investment product from the Chinese e-commerce giant Alibaba.

On Wednesday, Alibaba used Sina Weibo, a microblogging service in China, to announce its most recent push into innovative finance: a form of crowd-funding for Chinese movies. Investors were offered an expected annual interest rate of 7 per cent for putting up as little as 100 yuan, or $17.

The new investment product, called Yu Le Bao, or Entertainment Treasure, is marketed as a way for ordinary Chinese to play mini roles as film producers.

Alibaba said investors could suggest what films should be made and who should direct and star in them. It said an initial batch of four projects – three films and one social networking game – together were aiming for total financing of 73 million yuan.

They include a fourth instalment in the Tiny Times series of films, as well as a screen adaptation of the popular 2004 novel Wolf Totem.

Yu Le Bao is the latest example of how Alibaba's novel online investment offerings are encroaching on the state-owned banking system. By offering returns of up to 7 per cent, about twice the maximum interest rate traditional banks are permitted to pay on a benchmark savings deposit, Alibaba is amassing a share of China's trillions of dollars in household savings.

It is also moving forward with plans for an initial public offering of stock in the US, which analysts have said could raise more than the $16 billion Facebook achieved two years ago. In June, the company introduced a money market product called Yu'e Bao, which translates as Leftover Treasure. As of last month, 81 million people had signed up for the product, which had $40 billion in assets under management.

Such success has led to greater scrutiny from China's financial regulators. Reports in the state-run news media this month said the central bank, the People's Bank of China, was considering limits on the payments handled by internet companies such as Alibaba and its biggest rival, Tencent.

At the same time, Alibaba's push into online finance has stoked a backlash from the state-dominated banking sector. On Tuesday, the Industrial and Commercial Bank of China, the nation's biggest bank, started restricting its business with Alibaba's online payment unit to a single branch.

In recent weeks, several of China's big state banks have begun limiting the money their customers can transfer into internet finance products such as Alibaba's. By setting its sights on China's movie industry, Alibaba is focusing on the world's fastest-growing major cinema market. Box-office sales in China grew 27 per cent last year to $3.6 billion, a total second only to the US, according to figures released on Tuesday by the Motion Picture Association of America.

But investments in Yu Le Bao will not go directly to financing movies.

Alibaba said ''in the initial phase'' they would be channelled into insurance and so-called wealth-management products being offered by Guohua Life Insurance, which is based in Shanghai. They would later be invested in the cultural industry, it said.

News Source:  SMH

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