China Might Further Tighten Control Over Large Fintech Firms by Limiting their Banking Partners, According to Former Finance Minister

Chinese authorities may consider further tightening control over large Fintech companies by restricting or limiting the number of banking institutions they can work with, according to the Securities Times which cited recent statements from a former Chinese finance minister.

As first reported by Bloomberg, bad loans might increase if any single platform starts controlling a large portion of the market, according to former Chinese Finance Minister Lou Jiwei (who recently delivered a speech at the China Wealth Management 50 Forum). Jiwei claims that trillions of yuan worth of loans were created by a local platform which may lead to serious problems.

He also mentioned that other firms might be permitted to offer similar services under the same terms and conditions. Jiwei further noted that China must prevent a “winner-takes-all” and “too-big-to-fail” scenario in the Fintech sector. His statements appear to be consistent with the country’s top financial regulators who are now focused on increasing their oversight and scrutiny of the nation’s Fintech giants (like tech giant Alibaba’s Ant Group).

In November 2020, Chinese lawmakers had published a set of draft rules that recommend overhauling the country’s micro lending platforms, which notably led to the sudden suspension of Ant Group’s (potential) $35 billion initial public offering (IPO) listing in Hong Kong and Shanghai.

China is now focused on strictly regulating its financial services industry. The nation’s authorities  claim that the Fintech space could pose serious challenges or great harm if it’s not property monitored and regulated. Jiwei recommended that China must solve issues related to financial disorder through deleveraging.

Jiwei suggested that credit bonds must no longer be traded on the country’s interbank market, which should go back to providing lending services.

Despite these challenges with certain Fintech businesses, China’s financial services sector continues to expand rapidly and industry professionals are quite confident about the country’s potential to maintain its dominance in global markets. In a recent speech delivered at the China Fintech Global Summit in Shenzhen, Liu Yingbin, Senior Assistant President, Hong Kong Monetary Authority (HKMA) said that Hong Kong can help mainland Chinese Fintechs go global.

Yingbin touted Hong Kong’s Fintech ecosystem which has emerged as a top Fintech hub due to the combination of governmental support and an active private sector driving innovation.

He explained the goal for Hong Kong to:

“…support mainland financial technology companies to go global … I hope that Hong Kong will deepen cooperation with the country in the field of financial technology, strengthen the exchange and interaction of financial technology innovation, and create a new peak for the financial technology innovation…” (translated).

As covered earlier this month, China is planning to encourage Fintech innovation while improving risk control measures, according to the nation’s banking and insurance regulatory commission officials.

As reported recently, Chinese regulators intend to introduce “special” and “innovative” regulatory guidelines for Fintech giants like Ant Group and Tencent Holdings.

As reported in November 2020, Chinese Fintechs must realize that their products can subject consumers to financial risk, according to an industry analyst whose comments came following a major sector-wide crackdown.

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