Overhaul of online platforms run by Chinese fintech firms including Ant Group ‘went well', though more work is needed, says regulator

Business overhauls at 14 mainland Chinese internet finance platforms including Ant Group to tackle disorderly expansion and anticompetitive behaviour that brought major risks to China’s finance sector have gone well, though more work is needed, a senior regulator said.

Self-inspection by the platform operators has been largely completed, although it will take more time for the revamp to be fully implemented as it involves complicated issues, Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission, said on Wednesday.

“These innovative financial platforms, previously not under our supervision, have gradually come under our scrutiny,” he told reporters. “This process takes time as we encountered difficulties in areas such as the identification and evaluation of their products, besides the protection of private personal data, corporate information and commercial secrets.

“While this is very complicated, overall we are confident that we can do a good job on the overhaul.”

Beijing unleashed a raft of new fintech regulations and an antitrust inquiry into the country’s technology sector late in 2020.

It came shortly after Ant’s US$34.5 billion dual initial public offering slated for Hong Kong and Shanghai was foiled at the last minute on the back of regulatory changes last November.

Guo told state-run China Central Television in October that the overhaul was about half done, after regulators posed about 1,000 questions to the 14 platforms operators, most of which were met with a good response.

Some internet services providers expanded aggressively into the online finance business in a “disorderly manner” and failed to put in place “meaningful” risk management systems, which posed major financial risks, he said at the time.

Many non-standard investment products were offered by these “pseudo-bank” platforms, which were not bound by capital adequacy requirements and other regulations that banks are subjected to.

Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission. Photo: Simon Song

Some mammoth internet platforms were deemed to have engaged in anticompetitive practices to gain excessive profits and prevented fair competition.

Ant Group, the fintech company affiliated with e-commerce giant Alibaba Group Holding, was forced to announce in December that it would close its Xianghubao mutual aid platform, amid Beijing’s regulatory crackdown on financial services in the technology sector. Alibaba owns the South China Morning Post.

The closure of the mutual aid service was part of an shake-out in China’s fintech industry, as regulators moved to ring-fence technology’s reach and influence into the financial services sector, amid concerns of potential risks to the underlying banking system.

Earlier last year, Ant Group’s consumer credit and microloan services – named Huabei and Jiebei, respectively – were told to merge into a Chongqing government consumer credit vehicle, with Ant given 50 per cent ownership.

Chinese search engine Baidu closed its mutual insurance platform Denghuo Huzhou in August 2020. Food delivery giant Meituan shut its Meituan Huzhu mutual aid platform on February 1 this year after 18 months of operation.

Tencent Holdings-backed online insurance technology firm Waterdrop closed its mutual aid business in March last year.