Money market funds in China have exceeded 1 trillion yuan and account for about 1 percent of various deposits of financial institutions in the banking sector.
The current scale of money market funds in China is still too small to trigger the bank run that worries banking regulators, Wu said.
Yields of money market funds have already fallen as a large amount of money moved into the market. Besides, if the banking regulators further expand the deposit rates, the general public will keep a lot of money in their savings account because the difference between the yields of money market funds and deposit rates continues to shrink, Wu said.
He did warn of an alternative scenario.
"If the deposit rates are not liberalized in the short term while the yield of Yu'ebao remains high, an increasing amount of money will move from savings accounts to money market funds. Even the banks will offer their own financial products, similar to Yu'ebao, to evade reserve requirements," Wu said. "By that time, the central bank may put Yu'ebao under deposit reserve regulations."
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