China regulator puts country's fintech giants on notice hinting at more rules

GUANGZHOU, China — China's top banking regulator on Tuesday questioned the power of the country's large financial technology companies and hinted at "timely and targeted measures to prevent new systemic risks."

The move appears to be a nod toward more regulations in China's burgeoning fintech sector.

Over the past few months, Chinese regulators have been growing increasingly concerned about the size of its technology giants and have proposed draft rules to regulate areas including data use and antitrust.

Like in the U.S., China's technology firms have been largely able to grow unencumbered and have become a feature of daily life in China — particularly in areas like mobile payments and communications.

On Tuesday, Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission (CBIRC), laid out areas that the authorities will be looking at closely in the fintech industry during a speech at the Singapore Fintech Festival.

"Facing the rapid growth of fintech, we will adopt a positive and prudent approach. We will encourage innovation while enhancing risk control, so as to address to new problems and challenges," Guo said.

Cybersecurity is one area of concern for the regulator. He spent a lot of time questioning the power of big fintech giants in China, but did not mention any by name.

Guo said "promoting fair market competition" is a priority but traditional anti-monopoly laws might not work for the fintech industry.

"(The) fintech industry leads to many new phenomenon and problems. We might need to pay more attention to the following questions. Have the big tech blocked newcomers? Have they collected data improperly? Have they refused to disclose information that should be made public? Have they engaged in conduct misleading users and consumers?"

Last month, another regulator, the State Administration for Market Regulation, released draft rules that defined for the first time, what constitutes anti-competitive behavior. It is seen as broadly aimed at the country's technology giants like Alibaba, Tencent, Baidu, Meituan and others.

When it comes to mobile payments, Alibaba affiliate Ant Group and Tencent are the two dominant players via their respective apps Alipay and WeChat. But they also operate other financial services such as linking borrowers to lenders. Without naming these firms, Guo appeared to take aim at both these companies that do more than just payments.

"Some big tech operate cross-sector business with financial and technology activities under one roof. It is necessary to closely follow this spillover … and take timely and targeted measures to prevent new systemic risks," he said.

Regulators have already taken action against Ant Group, which was gearing up for the world's biggest initial public offering in November in Shanghai and Hong Kong. That listing was abruptly suspended days before its debut, and came after management at Ant Group met with regulators.

The Shanghai Stock Exchange said Ant had reported "significant issues such as the changes in financial technology regulatory environment." Just days before, the Chinese central bank and regulators issued new draft rules for online micro-lending, which could affect Ant Group.

Guo also said there is a need for "clarifying data ownership," claiming large technology firms have "de-facto control over data." He said it is "necessary to clarify data rights of different parties."

Earlier this year, China's legislature passed a Civil Code, which focuses on data protection for individual users. It is set to come into effect next year.

Guo also said there has to be a focus on strengthening international co-ordination for cross-border data flow.

In September, China launched a global data security initiative outlining principles that should be followed in areas from personal information to espionage.