Money market funds must come under controls, PBOC official says

Bank deposits for money market funds like Alibaba Group Holding Ltd's Yu'ebao should be subject to the deposit-reserve requirements, a China central bank official said.

A major reason why Yu'ebao and similar financial products can offer investors high returns is they are not subject to deposit reserve management, Sheng Songcheng, head of the People's Bank of China's statistics department, said in an opinion piece published on the bimonthly China Finance journal on Sunday.

"By putting money market funds under deposit reserve regulations, we will ensure fair competition and reduce the scope for regulatory arbitrage," Sheng said. He estimated Yu'ebao's yield will drop about 1 percentage point if 20 percent of its bank deposits are set aside as reserves.