Prompt, wise regulation needed to curb risks among online giants

By Wen Sheng Source: Global Times Published: 2020/12/15 23:42:14

Ant Group

 Ant Group, one of China’s largest online payment platforms, reaffirmed on Monday that it fully agrees with the financial regulators’ approach and it will launch comprehensive scrutiny of its business model. The company also pledged to take effective measures to curb debt risks. 

Eric Jing Xiandong, executive chairman of Ant Group, acknowledged that a recent wave of heavy criticism has targeted the company, which the online payment giant will take into account. As a top fintech business, the company has vowed to prioritize financial safety. 

In early November, China’s regulatory authorities ordered the suspension of Ant’s planned dual IPOs at the Shanghai and Hong Kong stock exchanges. The flotation had been set to be the largest in history, as it was expected to raise up to $35 billion for the company. Since then, policymakers have stepped up efforts to overhaul laws and regulations related to the domestic fintech industry, which has been booming and leading the world in innovations.  

A task force headed by the State Council Financial Stability and Development Committee and the central bank, is reportedly overseeing Ant’s compliance. Faced with an increasingly strict regulatory environment, Ant Group’s IPOs are likely to be put off to late 2021 or even 2022, and the IPO price will be reduced considerably, market analysts have predicted 

Billionaire Jack Ma Yun, the boss of both Alibaba and Ant, angered regulators in October during a public forum with his criticism of traditional banking regulations, such as the internationally accepted and observed Basel Accords. What Ma wanted was less regulation for internet platforms so that his colossal businesses could have free rein to squeeze out competitors and reap hefty profits, critics said.
The banking sector, like our human artery system, provides the life blood of funding for a country’s economic operation. So, it is normal and necessary for China’s two online payment majors – Ant Group’s Alipay and Tencent’s WeChat Pay – to be placed under the same regulatory regime as China’s traditional banks, to ensure fair market competition and the safety of the country’s overall financial system.

If Ant Group’s lucrative online lending businesses are not scrutinized on a regular basis, the platform could cause rising debt risks, and it may one day become a “too big to fail” financial beast, the kind that needs a government bailout if it has a crisis of capital inadequacy or a severe default.  

All of China’s giant internet-based platforms, whether for e-commerce, food deliveries, parcel couriers, tourism services, ride hailers, music, video-sharing or messaging apps ought to be strictly guided by law and reined in by government regulators. 

Why? Because although a healthy market place must tolerate free-wheeling competition, the online platforms – like Alibaba, Tencent and US-based Facebook, Amazon and Google – are increasingly suspected of monopolistic behavior. If they are not controlled, they could stifle market competition and innovation.  

Giant platforms must be regularly scrutinized by regulators so that they do not engage in illegal behavior or abuse their dominant market position. As well as artificially raising prices, the platforms have sometimes compromised users' data privacy to gain illicit profits.

It was a prompt and wise move to halt Ant Group’s IPOs, and the policymakers will take some time to mete out the appropriate regulations to deal with the hidden risks embedded with the online payment giant. 

Online platforms’ penetration into economies and our lifestyles in recent years has shown the power of the digital revolution, which has remolded our lives and greatly advanced the economy. But the process must also be regulated, or chaos could ensue. 

The author is an editor with the Global Times.


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