Beijing summons online financial platforms and warns over unfair market practices

China’s top financial regulators have summoned 13 of the country’s technology companies that run online financial businesses, including Tencent Holdings and Tik Tok-owner ByteDance, and told them to step up anti-monopoly measures and to halt “the disorderly expansion of capital”.

The People’s Bank of China (PBOC), the China Banking and Insurance Regulatory Commission, the China Securities Regulatory Commission, and the State Administration of Foreign Exchange talked as one with the tech-run online financial platforms on Thursday, according to an announcement issued by the central bank late that evening.

The companies asked to attend were internet giant Tencent, Baidu’s fintech arm Du Xiaoman Financial, JD.com’s JD Finance, ByteDance, Meituan Finance, Didi Finance, Lufax Holdings, Xiaomi’s fintech arm Airstar, 360 Digitech, Sina Finance, Suning Financial Services, Gome Fintech and Trip.com’s fintech arm.

“Serious issues, including unlicensed fintech businesses, companies running financial businesses beyond the permitted business operations … and infringements of the lawful rights and interests of consumers are practices widely seen among online financial platforms,” said the regulators at the meeting, which was organised by the PBOC’s deputy governor Pan Gongsheng.

The online platform companies being summoned this time all run large-scale and comprehensive businesses, are influential in the sector and have seen common problems come to light. These problems must be corrected in a serious manner,” according to the announcement.

The regulators have asked the companies to carry out self-inspections and meet the central government’s requirements, and highlighted that financial businesses should serve the real economy as well as lowering financial risks.

The move is just the latest development in a broad push by Beijing for greater control over the nation’s sprawling fintech industry after regulators abruptly shelved Ant Group’s US$34.5 billion dual listings in Shanghai and Hong Kong last November on concerns over the growing role of fintech businesses in the nation’s economy and amid a regulatory overhaul.

Beijing is targeting the country’s key internet platforms at a time when the Chinese government is trying to use antitrust laws and other regulatory approaches to contain what it calls the “disorderly expansion” of capital, the Chinese economy and broader society.

China’s regulators have lectured the country’s big tech firms several times now on the need to clear up misconduct, such as forcing merchants to pick only one platform, abusing dominant market positions, and making hostile bids to acquire top players in specific market segments.

They have also been upbraided by Beijing for misuse of big data which has led to unfair pricing for some clients, for turning a blind eye to inferior quality products, as well as evading tax payments.

Alibaba Group Holding, the world’s largest e-commerce company and owner of this newspaper, was fined 18.2 billion yuan (US$2.8 billion) by the State Administration for Market Regulation (SAMR) in April for “abusing its dominant market position in China’s online retail platform service market since 2015 by forcing online merchants to open stores or take part in promotions on its platforms”, putting it in breach of the country’s anti-monopoly law.

Beijing is keen to fend off systemic risks and wants to make sure that new financial players do not upset the balance of the existing, centrally-planned economy.

This marks a departure from an earlier phase where China had allowed start-ups to flourish and experiment as they helped spread financial services into rural regions. But this period was also marked by some scandals, such as fraudulent peer-to-peer lending services.

Regulators published draft rules last November saying that online microloan companies must put up at least 30 percent of any loan agreed on their platform, rather than leaning on the balance sheets of traditional lenders, such as big banks.

Regulators also stopped commercial banks from distributing online deposit products via fintech platforms last December.