PROMOTING E-COMMERCE: Visitors check out the latest product offerings at Suning's e-commerce exhibition booth at the China International Software Expo on September 6 (CFP)

After the first private bank—China Minsheng Banking Corp.—was set up in 1996, China's private banking sector underwent a period of stagnation. Today, things have turned around. In July, the Chinese Government made clear its intention to explore the establishment of private banks invested by private capital.

Ignited by the signal to open up the banking industry, dozens of private enterprises have submitted applications to set up private banks, including China's biggest appliance chain Suning Commerce Group and Internet giant Tencent Holdings. In fact, private capital, hitherto, has accounted for a considerable share of China's banking sector. However, out of concerns over financial risks and protecting the rights and interests of depositors, China's regulators have taken a cautious attitude toward the promotion of private banks.

Wang Lianzhou, an expert on fund investment and management, said that China's financial reforms have lagged behind its economic reforms. The establishment of private banks, he said, will break the monopoly of large state-owned banks, expand the availability of capital and better meet the development demands of rural areas and small and medium-sized enterprises.

The policy shift to allow more private banks in China has generated a lot of interest, particularly from some unexpected players.

On September 16, Alibaba Group formed a strategic alliance with China Minsheng Banking Corp. to cooperate in banking services, marking a closer step toward offering financial services to online shoppers by the country's largest e-commerce company.

Predating the move, Alibaba Financial China Holding Ltd. began offering money management products like depositing and lending through Alipay. Yu'ebao, an online fund investment service that was launched by Alibaba Group's online payment unit on June 13, has been considered as a pioneer entering the territory of traditional banking. The product allows customers to buy money market funds and other financial products with idle cash in their Alipay account. Moreover, funds in Yu'ebao accounts can also be used for online shopping. Just one week after its debut, more than 1 million customers signed up for an account.

Suning Commerce Group, another e-commerce player, has also submitted an application. Due to its massive network of offline chain stores across the country and its new platform to boost its e-commerce business, Suning has an upper hand. Hu Yanping, founder of the Internet data center under the market research firm DCCI, believes commercial entities with offline branches would be better received by customers. If Suning's storefronts are allowed to establish banking outlets in the future and interbank networking, the company could quickly become a leader in the private banking industry.

Besides e-commerce companies, those eyeing the prize of private banking also encompass Internet companies and traditional industrial enterprises, each of which possess unique advantages. Currently, Tencent's Tenpay and WeChat's payment services are witnessing increasing cash flows.