With Ant’s IPO, China emphasizes the need for fintech regulation

People walk on foot from the headquarters of the Central Bank People’s Bank of China (PBOC) on September 28, 2018 in Beijing, China.

Jason lee | Reuters

BEIJING – Just days after the sudden suspension of the Ant Group’s IPO – which was the world’s largest offering – China’s financial authorities stressed the need to ensure adequate regulation.

But they did not discourage entities from working with ANT – an Alibaba-affiliate, which is one of the two major mobile payment systems in the country, Alipay, and several subsidiaries for tech-driven business lending and personal investment Operates. Ant also has several partnerships with major banks and financial institutions.

Ant Group’s dual listings in Shanghai and Hong Kong were originally created for Thursday, but had since been discontinued two days earlier.

“At the same time, (about) Ant Group, as a large privately run enterprise, we also hope that everyone can, according to rules and regulations, maintain a cooperative business and Can carry, ”Liang Tao said. China Banking and Insurance Regulatory Commission. This is a translation of his Mandarin-language comments according to CNBC.

As mobile payment and online banking emerged over the years in China, Liang said the commission had issued relevant financial industry licenses, while keeping in mind the interests of consumers.

In late October, China’s Financial Stability Committee said in a meeting that financial technology was evolving quickly, and the relationship between financial development, stability and security should be handled well.

On Monday, the China Securities Regulatory Commission said that Jack Ma, executive chairman Eric Jing and CEO Simon Hu of Ant Group were called and interviewed by People’s Bank of China (PBOC), China Banking and Insurance Regulatory Commission, China Securities Regulatory Commission Given. , And the State Administration of Foreign Exchange.

Also on Monday, regulators issued draft rules that sought to raise standards for online lending and limit the amount available for borrowing.

The following day, the Shanghai Stock Exchange suspended the Ant IPO citing a meeting and changes in the financial regulatory environment.

PBOC Deputy Governor Liu Guoqiang told reporters on Friday that the Shanghai Stock Exchange was decided to protect the interests of consumers and investors, ensuring healthy and stable growth of the financial market in the long term and in accordance with the law.

He also pledged that the central bank would “continue financial supervision in accordance with the law, with the idea of ​​regulating growth and encouraging innovation.” Liu said there should be equal financial innovation, protection of the economy and prevention of systemic financial risks.

The two officials were speaking at a press conference on support for the financial system for businesses in China and efforts to improve economic development. He did not specifically comment on Ma’s controversial speech last month, which appeared to criticize regulators.

Fintech’s role in a state-dominated system

China’s state-dominant banking sector has preferred lending to state-owned businesses, rather than privately owned businesses. The rationale is that private and distant small firms lack evidence for their ability to repay debt in environments without a standard credit score system.

Small businesses have turned to other sources, including the off-balance sheet shadow banking sector, which refers to activities undertaken by financial firms outside the formal banking sector and may be subject to lower levels of regulatory oversight.

More recently, big data analysis run by companies such as Ant and collaborating with banks have helped businesses improve their ability to borrow.

According to PBOC, as of the end of June, the balance of consumer loans of tech firms of China’s commercial banks was 1.43 trillion yuan ($ 216.08 billion).

Chinese authorities this year pushed efforts to improve private lending, lending to small businesses in the wake of the coronovirus epidemic. According to Liu of the PBOC, policies such as lowering fees and repaying debt have released 1.25 trillion yuan into the economy by October, a target of 1.5 trillion yuan for the year.

Chinese regulation may initially be much lower than in other countries, allowing for the large-scale development of an industry before it is severely broken. An example is the peer-to-peer lending industry, in which many companies took money by claiming to use technology to connect investors to loans or high-yield investment products before they fell and regulators stepped in.

At Friday’s press meeting, the Chief Counsel for the China Banking and Insurance Regulatory Commission, Liu Fusho, said that the number of operating peer-to-peer lending companies has fallen from a peak of about 5,000 companies to three lenders currently, which they did not name. have taken. He said the scale of loans and participating individuals declined by 28 months or two years and four months.

“On the one hand, we support fair innovation in the financial industry on the basis of controllable risk,” said Liu of the banking commission. “At the same time, (we) ensure that innovation functions and should contribute to the real economy.”


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