The official news outlet for the Chinese central bank has published an article indicating that financial authorities will push China’s large-scale online finance platforms to establish financial holding companies in order to expedite their effective regulation.
Just days following the launch of an anti-trust probe into e-commerce giant Alibaba, the article published by PBOC’s Financial News on 27 December highlighted the need to strongly regulate the fast expanding field of online finance.
“There is no preformed experience to which we can make reference when regulating the complex financial operations of Internet companies,” said Zhang Modong (张末冬) in the article entitled “Lawful Implementation of the Regulation of Financial Holding Companies, Driving Online Companies to Advance Steadily and Travel Far” (依法实施金控公司监管 推动互联网企业行稳致远).
“In recent years a number of Internet enterprises have directly or indirectly undertaken multiple types of financial operations, obtaining numerous financial licenses as well as establishing integrated platforms,”
“While a number of companies have stressed ‘definancialization’ in name, their profit sources are still primarily derived from financial operations.
“According to the provisions of the ‘Financial Holding Measures’ and State Council decisions, Internet companies that have been established under certain conditions should lawfully apply to establish financial holding companies, and be subject to comprehensive, sustained and thorough regulation.”
In September China issued new regulations that clarified the conditions and requirements for the registration of financial holding companies in China, stipulating that under certain circumstances application for their establishment should be mandatory.
“For China, including qualified internet companies within the purview of financial holding regulation embodies the concepts of health and high-quality development, and will help to create a standardised and excellent market order,” wrote Zhang.
Zhang said that the implementation of financial holding company regulation is an extension of “strict regulation” of the financial sector by Chinese authorities, as well as a key link in the licensed regulation of financial operations.
The publication of the article arrives just after Chinese regulators launched an anti-trust probe into Alibaba on 24 December, as well as summoned its senior executives for “regulatory discussions.”
Pan Gongsheng (潘功胜), PBOC deputy governor and director of the State Administration of Foreign Exchange (SAFE), said that demands made of Ant Group during regulatory discussions held on 27 December included the establishment of a financial holding company.
Pan also indicated that regulators will focus on trust busting in future, and ensuring that all financial activity in China is licensed and subject to regulation.