Defenders of online finance point to its advantages

Commentators have claimed that online financing products such as Yu'ebao are altering the nation's financial terrain and even hurting the real economy, because online funds put customers' money into time deposits with banks, rather than directly into industry.

"I am wondering whether these online financing products will raise the costs for social financing, and then add to the burden on enterprises," said Liu Liehong, president of China Electronics Corp.

Pan Gongshen, vice-governor of China's central bank, said there's no conflict between Internet finance and the real economy.

"Internet finance will provide more support for SMEs because it is broadening investment channels among common people, improving the efficiency of transactions as well as lowering transaction costs," said Pan.

Pan called for further innovation in the financial sector and deeper financial reform. He said these trends would "ease access to the market and channel private capital into the financial sector."

Given the near-absence of a regulatory framework at present, Pan suggested that it is important to map out a supervisory system.

Ma Weihua, the former governor of China Merchants Bank Co Ltd, said it is necessary to affirm the innovation of online finance, especially before full deregulation of interest rates.

"Traditional banks are confronted with fiercer competition in areas such as payments, credit and wealth management.

"But the appearance of Yu'ebao and other similar products prompt us to realize the power of scattered capital from the grassroots level," said Ma.

In Ma's opinion, Internet finance and traditional banks are highly complementary, as they are both expanding the coverage of finance across China.