China's made 350 million millennials into day traders

A millennial problem is arriving in China. The nation’s 350 million young people are morphing into day traders. 

In recent years, China’s millennials have resorted to innovative financial products to accumulate wealth. Jack Ma’s Ant Financial Services Group, for instance, offers Yu’e Bao, a money-market fund, to anyone with a dollar to save.

And those with a bigger appetite for risk can lend on peer-to-peer platforms. Everyone knows that depositing money into traditional savings accounts is a losing game – the paltry 1.5% isn’t even enough to cover inflation. And while banks’ wealth management products offer better yield, you need to be a VIP client to invest.

But for young, middle-class savers, the path to riches has been narrowing. 

As the People’s Bank of China reverses course and re-opens liquidity taps, online money-market accounts are no longer a good option. The 1.1trn yuan ($163.8bn, or R2.289trn) Yu’e Bao, for instance, now offers an interest rate of just 2.3%, a five-year low. 

Lending on peer-to-peer platforms is still lucrative, offering an average yield of close to 10%. But China is about to effectively shut down the industry. Currently, just seven of the 1,021 platforms meet the 500 million yuan registered capital requirement that Beijing will soon impose on nationwide operators. 

Even if P2P platforms were to re-capitalise, many millennial lenders would be regulated out. Anyone putting down more than 50 000 yuan will need to show she has at least 500 000 yuan in assets, or a 200 000 yuan annual salary over the last three years. About 80% of millennial lenders earn less than 10 000 yuan a month, and 30% earn less than 5 000 yuan, according to, a P2P online portal. 

So what options are left?

Secret sauce

Curiously, while China requires proof of assets or income for P2P lending, local government bonds, traditionally traded by professionals, have opened up to retail investors. And since almost all municipal bonds are AAA-rated, according to the new regulations, no experience is needed. Practically anyone can buy, and the minimum subscription is just 100 yuan. Last week, the 3.25%, five-year bonds issued by the city of Beijing were gobbled up. Carry aside, many are now hoping that they can somehow trade over-the-counter for profit if China’s bond market rallies further. 

Of course, Beijing has every incentive to lure millennials into the system. Special-purpose municipal bonds are the government’s secret sauce to fund off-budget stimulus projects: Somebody needs to buy that 2.15 trillion yuan of notes Beijing plans to sell this year. 

Invest or starve

And what about trading stocks? Never mind that the benchmark Shanghai Shenzhen CSI 300 Index already soared 33% this year; millennials are giving it a go now that China is starting a new technology board. Of course, they feel they have the edge to spot the next winners in electric vehicles or 5G. 

There may not be much of a decision, anyhow. By now, it’s invest or starve. Over the past year, the average home price in the four tier-1 cities of Beijing, Shanghai, Shenzhen and Guangzhou soared 17% from a year ago, far outpacing wage growth. This is great news for the older Generation X, which already owns properties. But for younger Chinese savers, middle-class pressures are crushing. Without owning a home, young men can be only "bare branches", unmarried and childless.

Every once in a while, China’s state-owned media outlets write front-page editorials warning against speculative trading. Unfortunately, China’s millennials have to become gamblers, lest they risk falling off the social ladder.

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