XIAOMI Corp., the world’s third-largest smartphone maker, has started an online money market unit to compete with Alibaba Group Holding Ltd., the dominant provider in China’s 10 trillion yuan (US$1.61 trillion) market for online finance.

    Xiaomi is allying with E Fund Management Co. to offer a personal finance service, dubbed Huoqi Bao, that will offer deposit rates higher than traditional Chinese banks and will be accessible via an app to be bundled with Xiaomi handsets.

    The service will expand into offering personal lending and securities brokerage in the near future, Xiaomi said in a statement Tuesday.

    The money market fund Xiaomi is offering has recently generated annualized returns on deposits of 4.5 percent. Xiaomi was the second-most popular phone maker in China behind Apple Inc. during the first quarter of 2015, according to IDC.

    Alibaba and Tencent Holdings Ltd., China’s two biggest Internet companies, have also expanded into online banking and finance as China’s growing middle class and wealthy consumers seek alternatives to savings deposits.

    Xiaomi plans to offer the service to the 100 million users of devices with its MIUI operating system.

    Launched in 2013, Alibaba’s Yu’e Bao has grown into China’s largest money-market fund and had amassed 578 billion yuan in assets by the end of 2014. Tencent has said its Licaitong product launched in 2014 now has 100 billion yuan under management.

    China’s online finance market reached 10 trillion yuan at the end of March, according to research firm Sootoo.

    E Fund has 430 billion yuan in assets under management as of December, according to its website. (SD-Agencies)