China’s bank regulator has approved the launch of two privately owned commercial banks, part of a broader effort to offer better financing options for small companies and increase competition in the state-dominated banking sector.

An affiliate of Alibaba yesterday received a licence to open a bank in the prosperous east coast city of Hangzhou, where the e-commerce group has its headquarters. Alibaba will partner with Fosun International, one of China’s largest private conglomerates, to form Zhejiang Internet Commerce Bank, whose Chinese name plays on the similar pronunciations of the two characters for “online” and “commerce”.

The bank “will mainly satisfy the investment and financing needs of micro-companies and individual consumers, which refer to deposit products under Rmb200,000 ($32,500) and loan products under Rmb5mn,” Fosun said in a statement.