With the protracted crackdown on major Chinese tech companies, it’s safe to say that Chinese industry has entered a new technological era, especially fintech.
One of the fastest growing FinTech markets in the world, China’s FinTech investments reached $ 25.5 billion in 2018, constituting half of the world’s FinTech investments. But 2020 and 2021 saw a critical turning point in this rich monopoly history of fintech companies.
New laws and regulations prevent large companies from crowding out competition, thus hurting the market and consumer rights.
The top five integrated financial services companies include Ant Group, Tencent, JD Technology, Ping An, and Du Xiaoman Financial. Together, these companies provide services ranging from mobile payment systems to wealth management and credit rating services. The Chinese government is trying to strike a new balance between FinTech innovation and regulation.
The crackdown began in 2020 when Chinese financial regulators summoned 13 major financial technology companies to ask them to step up their anti-monopoly measures. In a statement from the People’s Bank of China (PBOC) and Chinese securities and banking regulators, they summoned Xiaomi’s fintech arm, Tencent; bytes; a JD Finance e-commerce platform of JD.com and the financial arm of the Meituan food delivery platform.
The first shake started with the suspension of Ant Group’s $ 37 billion IPO and was followed by new regulations preventing monopolies and scrutinizing large corporations. Then, in April, regulators fined Alibaba $ 2.8 billion for violating China’s anti-monopoly law.
Group of ants
Last week, the Financial Times revealed that authorities have now asked them to have independent applications in addition to the separation order for Any Group’s trading and payment platforms.
This refers to Ant’s Huabei and Jidbei, two apps that alone generate 40% of the revenue. The new orders expect Ant to hand over user data to a new state-owned credit rating company. The joint venture prevents Ant from assessing the company’s creditworthiness on its own, as applications only have the power to generate and process the credit. Instead, the decision-making power rests with the Zhejiang Tourism Investment Group.
The August anti-corruption investigation targeted Zhou Jiangyong, the party secretary in Hangzhou. Alibaba and Ant Group are headquartered in Hangzhou, and Zhou’s family has often been linked with scandals covering Ant Group’s actions.
Why Fin-Tech is rife
Two issues stand out here: The first is that Alibaba is unregulated and comes under the same scrutiny as commercial banks. They do not face most financial regulations and are free from supervision. In fact, this lack of regulation for non-bank mobile payment systems has been a blessing for companies like Ant Group of Tencent, the push to grow and gain great privilege. Globally, Chinese companies are more data-driven and therefore have access to tons of real-time consumption data, giving them the edge over their non-Chinese competitors. This allowed them to develop internationally.
Second, since Alibaba is a private company, the Chinese government has no control over big tech companies. Additionally, since Alibaba went public in the United States, U.S. shareholders have had a say in how Alipay works and influences it. It comes in the midst of the US-China technology war.
According to the annual report of the South China Morning Post Chinese Internet Report 2021, the new phase of China’s internet industry faces tough regulations, demographic shifts, and growing geopolitical tensions. The plans include replacing all of the Ant group’s operations in a financial holding company and overhauling its user data policy. It’s half the monopoly.
Last week, BenoÃ®t CÅurÃ©, head of the innovation department of the Bank for International Settlements, alluded to the growing concerns of the Chinese authorities. The concerns echo the growing impact of FinTech companies and their impact on privacy concerns and challenges with regulatory approaches.
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