China strives to get balance right with move on tech giants
- Beijing has made it clear that action against Alibaba and Ant Group seeks healthier development of the industry, while economic stability remains a top priority
Technology has revolutionised consumer finance, particularly in China. But in the process, fintech, as it is widely known, has so disrupted traditional banking and outrun the regulatory environment that the authorities in major world economies have stepped in to safeguard systemic stability and protect consumers. China is no exception.
Antitrust action to curb the dominance of tech giants rocked markets early last month when the authorities pulled the plug on Ant Group’s highly anticipated US$35 billion initial public offering.
The last-minute intervention signalled an overhaul of the regulatory regime amid a rapidly evolving domestic tech landscape. It has resulted in measures to ring-fence the industry against uncontrolled growth that could lead to financial risks. They include draft rules requiring fintech platforms to make higher provisions for loans and cap loan size.
Regulators have directed Ant, an affiliate of Alibaba Group Holding, the owner of this newspaper, to return to its roots with its online payments operation, while addressing a range of concerns, from competition and monopoly issues, to privacy protection in credit rating, to irregularities and compliance with rules across a range of associated businesses.
No country has yet figured out a standard regulatory regime for fintech companies. The key issue is how to strike a good balance between an antitrust regime and the healthy development of the so-called platform economy.
In that respect, Beijing has made it clear that this latest move ultimately is for a healthier development of the industry, while economic stability is a top priority.
China’s regulators also have to catch up with changing business models in the technology era, especially those that have been amplified, magnified and accelerated by the speed of the internet. There must be dialogue and consultation, and if this is the starting point of that journey, it will be good for the industry.
Alibaba and Ant have affirmed commitment to regulated development and the authorities have acknowledged the contribution to China’s economy of platform companies. But as these internet giants get bigger and bigger, there is a growing consensus they need to be seen to be more focused on the social responsibilities that go with dominance of any key economic sector.
Moreover, with China facing huge challenges at home and abroad amid global uncertainty, Beijing needs tech giants to innovate more than chase market dominance. It is therefore good that Alibaba and Ant have vowed to focus on research and development.
If the “rectification” agenda they have accepted takes some of the shine off their growth allure to investors, hopefully they will emerge healthier and stronger as pillars of an increasingly prosperous society.
