China reins in tech giants' finance arms after curtailing Ant's reach

BEIJING • Chinese regulators have imposed wide-ranging restrictions on the fast-growing financial divisions of 13 companies including Tencent Holdings and ByteDance, levelling many of the same curbs employed against Mr Jack Ma's Ant Group in a crackdown on the technology sector.

Units of JD.com, Meituan and Didi Chuxing were also among firms summoned to a meeting with several watchdogs, including the central bank, which spelled out a raft of requirements including stricter compliance when listing abroad and curbs on information monopolies and the gathering of personal data.

Businesses must restructure their financial wings into holding companies as part of a broad effort to subject themselves to more rigorous supervision, and sever "improper links" between their existing payments services and financial products, according to a joint statement on Thursday from the central bank, banking and insurance regulator, securities watchdog and the forex overseer.

China has waged a campaign to rein in its Internet titans as the government grew increasingly concerned over their spreading influence over every aspect of Chinese life as well as the vast amounts of data they have amassed through providing services like online shopping, chatting and ride-hailing.

The crackdown has forced Mr Ma's Ant to scrap its initial public offering while regulators have levied a record fine against affiliate Alibaba Group Holding.

"Nobody can escape the tough regulatory crackdown on fintech," said Beijing-based analyst Zhang Xiaoxi at Gavekal Dragonomics. "While the requirements are broadly in line with those imposed on Ant, those who are considering listing need to wait till they rectify all the problems."

It is unclear how long the companies have to enact changes, or how it would affect their core operations. Companies like Meituan, JD and Tencent rely on their payments operations to drive their core operations in e-commerce, gaming and social media. Some, like ByteDance and Didi, are said to be exploring overseas initial public offerings and the new regulations may impose a stricter oversight of the process.

The firms were also ordered to break up their information monopoly and to conduct personal credit reporting services through licensed agencies. They should strengthen their capital structure and compliance, strictly implement regulatory requirements and step up consumer protection mechanisms, according to the statement. Baidu, Trip.com Group and Lufax Holding were among others summoned to the meeting.

"Good days have gone," wrote Jefferies' analyst Shujin Chen. "We reiterate that China has shifted from encouraging personal consumption lending to curbing rapid increases in residential leverage."

The changes will likely hit profits and growth on several fronts, the analyst wrote. They will have to set up holding companies, which will require more capital; their payment and shopping apps will have to cut links with other financial products; and fintech companies will find it harder to get listed, including overseas and secondary listings.

"Regulators will keep close communication with platforms and check on their rectification progress at an appropriate time," the watchdog agencies said in their statement. "Those failing to rectify as requested or defying rules will face severe punishment."

Regulators have also pledged to curb the "reckless push" of technology firms into finance and last month outlined an overhaul of Ant, which will drastically revamp its business and subject it to being supervised more like a bank. The overhaul meant Ant will have to sever any improper linking of payments with other financial products including its Jiebei and Huabei lending services.

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