China continues crackdown on fintech firms

Chinese financial watchdogs has recently summoned 13 internet platforms engaged in finance business, including heavyweights Tencent and ByteDance, to order them to strengthen compliance with regulations.

The move by the four regulators is part of widening efforts by Beijing to rein in the country’s massive internet ‘platform economy’, which includes an ongoing antitrust clampdown backed by President Xi Jinping.

China’s platform economy has grown rapidly and covers whole range of e-commerce activities ranging from banking to shopping and food delivery.

The People’s Bank of China has said in a statement, “Internet platforms have played an important role in improving the efficiency of financial services and broadening the access of financial services to more people. At the same time, some financial services were running without licenses, and there are serious rule violations in areas such as regulatory arbitrage, unfair competition and damaging consumers’ interests.”

The companies will have to set up financial holding companies if they meet requirements to do so, as Alibaba’s fintech affiliate Ant Group was recently forced to do, a move that tightens capital requirements.

They should also draft ‘business rectification’ plans to comply with regulations, cut ‘improper’ links between their payment tools and other financial products, break ‘monopolies’ in holding data, and prevent risks in internet mutual aid businesses. They should also be more compliant with their issuance of asset-backed securities, and overseas listings, the central bank commented in a statement following the meeting between regulators and the companies.

Tencent and ByteDance did not immediately respond to requests for comment. Other companies targeted by regulators include Du Xiaoman Financial, which is backed by Baidu Inc. , as well as Meituan, Ping An-backed Lufax, 360 DigiTech, Trip.com, Xiaomi Corp. and JD.com’s JD Digits. None of these companies immediately responded to requests for comment.