With regulators cracking down in China, FinTech leaders are scrambling for capital and trying to plan their futures, Bloomberg reported Wednesday (Nov. 25).
Jack Ma‘s Ant Group, once on the cusp of being the future of finance in the country, had its double initial public offering (IPO) shot down by the government earlier this year, and the government is now clamping down on the efforts of other big companies trying to do the same things.
New rules would require online lending companies like Ant to provide 30 percent of funding for loans, and firms would be banned from operating outside provincial bases without approval from a watchdog, Bloomberg said. And those lending in multiple provinces would have to have 5 billion yuan in registered capital at a minimum.
Ant has had to cut back on its pace on packaging existing loans to sell to investors, according to an unnamed source quoted by Bloomberg.
Bloomberg reported that the IPO plans for eCommerce billionaire Richard Liu‘s JD Digits Technology Holding are now in limbo, and Lufax Holding, the country’s largest listed online lender, has had to redo terms with shareholders after its IPO fetched less than a previous round.
President Xi Jinping has been behind calls for more regulation on companies, with commentary from a banking official alleging Xi said he wanted regulators to “dare to” master their supervisory roles, according to Bloomberg.
Earlier this month, China debuted drafts for new rules for eCommerce companies, with the goal of trying to cut down on monopolistic power, PYMNTS reported. According to reports, the drafts by the State Administration for Market Regulation (SAMR) in China set out to prevent companies from using harmful business practices against competitors, including stopping eCommerce firms from restricting brands selling on multiple platforms.
The report said Alibaba has used such practices, among other companies. Last year the SAMR met with numerous companies to request them to stop the practice.
Sean Ding, a Washington DC-based analyst at Plenum, a research firm specializing in Chinese politics and economy, called it a political matter, saying that the government’s point was “sending such a strong message is for future FinTech companies to be more careful, understand that their products can bring about financial risk,” according to Bloomberg.