China signals a crackdown on its Fintech giants
Chinese authorities are thought to have been drafting legislation in areas such as anti-trust and data-use.
Only a few weeks ago one of the worlds richest men, who was on the cusp of launching the world’s largest IPO, was summoned to a crucial meeting with regulators who told him that the business he was hoping to float, Ant Group, no longer met the listing requirements and that the IPO of the $35 billion Fintech could not go ahead, and that major issues had been identified at the business.
The IPO which was scheduled to take place a few days later in Shanghai and Hong Kong was postponed indefinitely.
At first, it was thought that these moves were a sort payback for Jack Ma, who had been openly critical of China’s regulators, and that the authorities had moved to clip his wings, and remind both Mr Ma, and the markets who was in charge, and to do so in a very public way.
And while there may have been something in that theory it now seems as though the Chinese authorities are looking to clamp down on all Fintechs in the country.
On Tuesday, Guo Shuqing, Chinas top banking regulator questioned the power and influence enjoyed by the countries tech giants and suggested that “timely and targeted measures” could be introduced “to prevent new systematic risks”.
The regulators stopped short of mentioning any specific companies or indeed the measures that may be introduced, however Alibaba, Tencent and Baidu are seen as likely candidates.
Chinese authorities are thought to have been drafting legislation in areas such as anti-trust and data-use. Apps such as Alipay and WeChat have massive penetration in Chinese society and have a dominant position in the mobile payments space in the country, some 47% of Chinese cell phone users use mobile payment services.
In 2018 almost 533 billion transactions were recorded on the countries mobile payment networks which had a value of 445.2 trillion Yuan according to research and markets.com.
Ant Group’s Alipay has 700 million unique users. Whilst rival service WeChat, owned by Tencent, enjoyed sign up rates of 200,000 new users per day in 2019.
US regulators and lawmakers have begun to examine the power and possible monopolies enjoyed by the likes of Google, Facebook, Amazon and Microsoft, and it now seems as though their Chinese counterparts are considering something similar.
Guo Shuqing who is Chairmen of the China Banking and Insurance Regulatory Commission or CBIRC said that
“Facing the rapid growth of fintech, we will adopt a positive and prudent approach. We will encourage innovation while enhancing risk control, so as to address new problems and challenges,” he said. He also added that promoting fair market competition was a priority but that traditional anti-monopoly rules may not work where Fintechs are concerned.
In November China’s competition regulator the State Administration for Market Regulation published draft rules on what constituted monopolistic or anti-competitive behaviour, which may have been a first in the one-party state.
Additionally, China’s central bank recently drafted new rules around online microlending, which could have implications for WeChat pay, Alipay and their respective parent companies.
Data gathering and use also seem to be a concern to the Chinese authorities, earlier in the year the state legislature passed a new civil code on data protection for individuals that will come into effect in 2021, and as part of his comments yesterday Guo Shuqing said that there was a need for “clarifying data ownership”, that large technology firms have “de-facto control over data.” and that it was “necessary to clarify data rights of different parties.”
In the past, it has often been necessary to read between the lines of what Chinese authorities say, or don’t say, to be able to interpret their likely course of action, but in this case, it seems pretty clear that the wind is changing and that change may well not be favourable to China’s Fintech behemoths.
