BEIJING – Chinese regulators this week fined 11 tech companies, including Internet giant Tencent, for violating antitrust laws after they failed to get regulatory approval for past acquisitions or joint-venture deals.
On Thursday (April 29), 13 firms, which included Tencent, Didi and TikTok parent ByteDance, were summoned for a regulatory meeting and told to adhere to tighter regulations on their financial arms.
It follows an announcement on Monday that delivery giant Meituan was under probe for monopolistic practices, forcing retailers to sign exclusive sales contracts, with regulators using similar language as when announcing a probe on Alibaba last December.
Coming on the back of a record 18.2 billion yuan (S$3.7 billion) fine on Alibaba, the moves signal a seismic shift in the way the industry will operate going forward, sending a clear message: The days of lax oversight are over.
While the hands-off approach has allowed the industry to flourish, there are concerns that the companies, now thoroughly integrated into daily lives, could pose a challenge to existing systems through their monopoly of various sectors.
The recent moves against tech giants are twofold: those running financial services are being reined in, while firms that deal with consumers are also being told to clean up their act.
Beijing has made anti-monopoly work one of its economic targets of this year but regulators have exponentially intensified scrutiny of Internet companies in the past two months: Since March, tech executives have been summoned for regulatory meetings at least thrice, each time receiving similar instructions to adhere more closely to market regulations.
Much of this stems from concerns about tech companies moving into the financial sphere, offering unsecured loans and financial products to entrepreneurs and members of the public, and yet are not subject to the same level of regulation and scrutiny as traditional financial institutions.
Many of them leverage their immense trove of user data, ranging from chat habits in Tencent’s WeChat to transportation patterns from ride-hailing app Didi.
Regulators have said they will curb the “reckless push” of tech companies into finance.
Thursday’s meeting involved several financial watchdogs including the central bank and the State Administration for Market Regulation (SAMR). The 13 firms summoned also included a food delivery platform (Meituan), an e-commerce platform (JD.com) and a travel booking website (Trip.com). All have set up financial arms which provide loans and financial products.
“The meeting underscored that the authorities will extend their recent crackdown on Ant Group to other big fintech platforms and treat these players as formal financial institutions – with stricter requirements – rather than as firms,” political risk consultancy Eurasia Group wrote in a research note.
This is aimed at limiting the risk posed by tech companies and their lending practices, which Beijing fears could upset the country’s financial system.
“The main concern is (about these firms) pushing people to borrow more than they need or can afford to pay back,” said Mr Martin Chorzempa, a senior fellow at the Peterson Institute For International Economics who specialises in the Chinese economy.
While companies like Alibaba, which extends loans to small businesses, help generate economic growth, personal loans are a slightly more prickly issue.
“Consumer credit is more controversial because in many cases it just leads people to buy more things earlier, but not necessarily to be more productive,” Mr Chorzempa told The Straits Times.
For several years now, regulators have felt that companies running “super apps” like WeChat and Alipay hold too much sway over daily lives: the apps are used for nearly everything – from utility payments to transportation.
WeChat Pay and Alipay also have a virtual duopoly over e-payments in the country, which gives them an overwhelming advantage over competitors.
“The Ant IPO just crystallised that view and broadened the attention that top political leaders paid to this and related issues,” Mr Chorzempa added.
Regulators torpedoed Alibaba’s fintech affiliate Ant’s attempted listing last year before putting the tech firm under investigation.
Regulators last month outlined an overhaul of Ant, which will drastically revamp its business and lead to it being supervised more like a bank.
An executive in a tech company which runs a food delivery platform said the moves are intended to push firms into action.
She added: “When we saw what was happening to Ant and Alibaba, we thought it’s just them who’d be affected while the rest of us can wait and see.
“But the government is really holding our feet over the fire now and we have no choice but to comply.
“There’s a general sense amongst the various firms that big changes are coming, and we might not like it.”
Last month, the authorities also took aim at the live-streaming sector, a vital part of e-commerce in pandemic-era China.
Seven regulators, including the Cyberspace Administration of China and the SAMR, last month released a series of guidelines to prohibit false advertising and sales of low-quality goods. Minors below the age of 16 will also not be allowed to host live streams.
With the coronavirus pandemic keeping people at home last year, consumers turned to e-commerce live streams, a cross between an infomercial and variety programme.
Estimates from Shanghai market research firm iResearch last year said the market could be worth up to 1.2 trillion yuan.
Previously, platforms hosting live streams such as the New York-listed Bilibili would self regulate, such as having algorithms that stop a feed when it detects images that appear to be promoting alcohol consumption.
According to market research provider Euromonitor International, China is the world’s top live-streaming market with 31.7 per cent of Internet users engaging in some form of it.
Consumers have taken to social media to welcome the moves.
“Hopefully this will be an end to crappy products being sold online,” wrote one user on Weibo.
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