BEIJING — Baidu Chief Executive Robin Li has joined the chorus of Chinese government advisers and banking executives calling for more regulation of the country’s rapidly growing Internet finance industry.

Speaking at a meeting of an advisory body to China’s Parliament, Mr Li said on Monday that he saw potential risk in the sale of financial products by Internet companies and that government oversight should be strengthened.

“People in the Internet industry are not financial experts,” Mr Li said on the sidelines of the meeting of the Chinese People’s Political Consultative Conference, the Xinhua news agency reported yesterday. A Baidu spokesman confirmed the comments.

People’s Bank of China Governor Zhou Xiaochuan said yesterday the central bank would not crack down on investment funds sold over the Internet but would improve regulation in the sector, reported Xinhua.

The Chinese authorities are looking at creating tighter regulations for such funds, people familiar with the matter told The Wall Street Journal.

At the same time, the sources said the authorities do not want to squelch innovative products that could shake up the country’s sluggish financial system, which many economists say does a poor job serving smaller businesses and individuals.

Baidu’s Mr Li said the company is marketing financial products created and administered by third parties, not products that the search giant has created itself, “since we don’t have the licence or other financial abilities; this brings risk”, he said, reported Xinhua.

Since last summer, China’s largest Internet companies, led by Alibaba Group Holding, have begun selling money-market-like funds directly online. The funds offer returns far above traditional savings accounts in China by investing in interbank loans and deposits as well as bonds. Alibaba did not respond to a request for comment.

The ease of use and the Internet giants’ widespread advertising capabilities have led millions of Chinese investors to pour billions of yuan into the funds.

The most popular Alibaba product, Yu’E Bao, had attracted 400 billion yuan (S$82.7 billion) as at the end of last month and had about 81 million user accounts. Baidu has not disclosed the amounts it has sold.

China’s state-dominated banking sector has complained that the new products could drain money from the banking system. In only nine months, Alibaba’s Yu’E Bao has attracted the equivalent of roughly 0.5 per cent of the country’s 74.2 trillion yuan worth of deposits. A report issued last week by brokerage China International Capital Corp projects that in three years, products such as Yu’E Bao could manage funds comparable to 8 per cent of bank deposits.

The China Banking Association said last week that money-market funds sold by Internet firms should set aside reserves to meet liquidity shortages, making them more like banks and potentially denting their profitability.

Internet firms say they can make use of past records of online spending to predict when their users are likely to take money out of online accounts. Banking analysts and economists say Internet firms will not find the data much help if China’s economy slows rapidly, since China has not been through a recession in 30 years.

If companies are unable to predict a large-scale withdrawal, investors could face big losses as assets would have to be sold at low prices to generate liquidity for the money-market funds, they said.

DOW JONES