Expansion of Chinese Authorities' Regulation on Fintech Companies

Following Ant Group... 13 Companies Including Tencent Summoned, Ordered to Correct Monopoly Practices

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kwon Jae-hee] Chinese financial authorities have summoned 13 information and communication (IT) companies, including Tencent, ordering them to rectify 'major issues' related to violations of antitrust regulations. The crackdown on fintech companies, which began with Ant Group, appears to be spreading across the industry.

According to the Wall Street Journal (WSJ) on the 29th (local time), the People's Bank of China, the country's central bank, announced in a statement that the People's Bank, insurance and securities financial institutions, and foreign exchange regulatory authorities had summoned 13 companies. These companies reportedly include Tencent, ByteDance, Baidu, JD.com, Meituan, Didi Chuxing, and Ctrip. However, Ant Group, which has already been regulated, was not included this time.

China's market supervision authorities stated, "The remarkable growth of these companies in the past is commendable," but also pointed out that "anti-competitive practices have caused harm to consumers."

Accordingly, Chinese authorities demanded these companies to make corrections similar to those required of Ant Group. The core requirement is to secure capital so that these platforms can cover 30% of the total loans they provide to banks. They were also ordered to sever inappropriate linkages between payment services and other financial services and to improve transparency in transactions. Furthermore, they were urged to comply with regulatory requirements when conducting online lending and deposit-taking operations.

While Chinese authorities claim their stance is to strengthen consumer rights and rectify the rules of fair competition that were overlooked during the fostering of fintech businesses, the reality is interpreted as the Chinese government, which is promoting digital currency, aiming to regain leadership over related industries such as fintech.

Tencent's WeChat reportedly has over 1 billion users, the majority of whom use the payment app WeChat Pay. Both Tencent and Ant Group started with mobile payment services and have developed into comprehensive financial platforms offering loans, investments, insurance, and more, threatening the position of Chinese financial authorities leading digital currency reforms. JD.com and Didi Chuxing have also launched consumer credit services, crowdfunding, and loan products.

Martin Chorzempa, a researcher at the Peterson Institute for International Economics (PIIE) specializing in the Chinese economy, said, "A fundamental change in the Chinese fintech model is beginning," and evaluated it as "an attempt to completely change the direction of the Chinese app model, which has proven to be very innovative."

This content was produced with the assistance of AI translation services.