Beijing summoned 13 internet companies engaged in finance business on Thursday, including Tencent and ByteDance, ordering them to comply with tougher regulations, as part of a broad effort to further regulate the country’s most powerful tech giants.
China’s central bank, along with the banking and insurance regulator, securities watchdog and foreign exchange overseer, demanded the 13 firms fix a number of “widespread and stark problems” existing in the fast-growing fintech sector, including providing financial services without a license, inadequate corporate governance, regulatory arbitrage, taking part in unfair competition and harming consumers’ rights.
Financial divisions of food delivery giant Meituan, e-commerce retailer JD.com and ride-hailing provider Didi Chuxing are also among the 13 fintech platforms which were ordered to conduct self-inspections and change business practices that violated rules.
To do so, these companies may need to undertake an overhaul of their business model, which has helped them develop mobile payment apps with hundreds of millions of users and other popular financial products under relatively light regulatory oversight.
The companies must restructure their financial affiliates into holding companies, meaning they have to submit themselves to closer supervision. The “improper links” between their existing payment tools and other financial services must be broken. This involves not allowing payment platforms to promote loans too aggressively and cutting off an important advertising channel for the companies, as reported by the Financial Times.
The firms should be compliant with guidelines when issuing asset-backed securities or seeking an overseas listing, said the central bank in a statement. Officials also asked the companies to increase the transparency of transactions on their platforms, as mobile payment apps such as Tencent’s WeChat Pay share fewer data with the government than traditional state-owned banks.
Beijing’s wide-ranging crackdown on the country’s big tech groups picked up steam after the Chinese government abruptly halted Ant Group’s $34.5 billion IPO last November. Earlier this month, regulators imposed a record $2.8 billion fine on Alibaba for anti-competitive behavior, demanded its fintech subsidiary Ant Group receive supervision of the central bank – a similar model to the operations of traditional banks, and ordered 34 major Chinese internet companies to publicly promise to follow antitrust regulations.
Earlier this week, Meituan became the latest target. The State Administration for Market Regulation announced on Monday that it has launched an antitrust investigation into the food delivery behemoth amid reports that it had engaged in suspected monopolistic conduct including forcing merchants to use its services exclusively – a practice known locally as “pick one of two”.