China is reportedly planning to introduce “special” and “innovative” regulatory guidelines for Fintech giants like billionaire Jack Ma’s Ant Group Co., which is a subsidiary of the Alibaba Group Holding (NYSE:BABA). Regulators in China aim to create new policies so they can eliminate monopolistic practices while enhancing risk controls.
Recent advancements in technology are beginning to transform the financial services industry, Guo Shuqing, Chairperson of the China Banking and Insurance Regulatory Commission and Party Secretary of the reserve bank, noted in an update that outlines various regulatory measures over the course of the next 5 years. As first reported by Bloomberg, Shuqing’s article was referenced in the official Shanghai Securities News.
Shuqing stated that financial innovations can be a “double-edged sword.” Chinese professionals and organizations might not have a lot of “experience in legal standards and risk monitoring” for handling mobile payments, online borrowing or insurance services, Shuqing said.
Shuqing is notably the highest-ranking regulator to discuss these issues after Chinese authorities recently suspended the (potentially) record IPO that Ant Group had been planning to launch in November 2020.
As covered, China has recommended deeper and stricter antitrust oversight of large tech firms like Alibaba Group and Tencent Holdings, which have been aggressively expanding their operations into the finance sector without too much oversight. Regulators had expressed concerns that these activities might lead to serious challenges for local banks and regulatory agencies.
China’s reserve bank governor Yi Gang and Yi Huiman, who’s serving as China’s Securities Regulatory Commission Chairman, have also been focused on reducing the potential financial risk that may result from allowing tech giants to expand into the emerging Fintech sector.
Ant Group is currently in the process of updating its business model so that it can adhere to new regulatory guidelines after the crackdown that suspended its $35 billion+ IPO. According to reports from local sources, the chances that the Ant Group will manage to pursue its stock listing in 2021 are not looking too good at the moment. This, as China continues to make major changes to regulatory requirements for Fintech businesses.
Shuqing has noted that the main part of the global Basel Accords is to use capital requirements to place limits on lending while keeping leverage within a safe or manageable range. He claims that without having adequate capital, financial services could “get into trouble sooner or later.”
Ma had criticized Chinese regulators during a speech in October 2020. He had been critical of Chinese authorities and local banks, and had reportedly compared the Basel capital requirements to a special club for the elderly. Ant Group’s platform has now reportedly offered loans to over 500 million individuals.
Shuqing has suggested that the regulations “should cover all financial institutions, businesses and products,” adding that online loan firms and platforms have been dodging the applicable rules and guidelines under the guise of “financial innovation.”
Shuqing also claims that China’s property sector remains the country’s most prominent “gray rhino” when it comes to posing serious financial risks.