China’s central bank legislator says fintech needs regulation just like banks

BEIJING – The Chinese central government is making it clear that fintech companies, such as the Ant Group, are subject to the same strict financial regulations as banks.

Many start-ups in China and other countries are using new technologies to sell financial services cheaper and faster, from money transfers to loans. Rapid consumer adoption has led banks to work with start-ups, which often emphasize that they are technology or fintech companies, rather than financial institutions.

“But fintech is still essentially financial, so the ‘same business, same rules’ principle must apply,” wrote Pan Gongsheng, deputy governor of the People’s Bank of China, in an article published in the Financial Times on Wednesday. Pan also heads the national exchange regulator, the State Exchange Administration.

“We need regulation that emphasizes substance and not the shape of a company,” added Pan. “The goal is to align business rules and standards with regulation to avoid arbitration.”

Chinese authorities have tightened regulations on fintech companies in recent months.

Most prominently, regulators abruptly suspended the listing of Ant, affiliated with Alibaba, in November, just days before the company made what would have been the largest initial public offering in the world.

Pan did not mention Ant by name in the article, but noted that “non-mobile payment banking businesses, led by Alipay and WeChat Pay” grew 75% annually between 2015 and 2019 in non-mobile banking payments. Ant Group owns Alipay and WeChat Pay is managed by Tencent.

He added that fintech companies present the same risks as other companies in the financial sector and can also collect “excessive” amounts of data and infringe on user privacy.

On Tuesday, China’s central bank governor Yi Gang indicated that Ant could resume the IPO process if he could resolve legal issues.

Read the full opinion article in the Financial Times here.