China central bank policymaker says fintech needs regulation just like banks

BEIJING — The central Chinese government is making it clear that fintech companies like Ant Group fall under the same stringent financial regulation as banks.

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

“But fintech is still finance in essence, so the principle of ‘same business, same rules’ should apply,” Pan Gongsheng, deputy governor of the People’s Bank of China, wrote in an opinion piece in the Financial Times Wednesday. Pan also heads the national foreign exchange regulator, the State Administration of Foreign Exchange.

“We need regulation that emphasises the substance not the form of a company,” Pan added. “The aim is to align business rules and standards with regulation to fend off arbitrage.”

Chinese authorities have stepped up regulation on fintech companies in the last several months.

Most prominently, regulators abruptly suspended Alibaba-affiliated Ant’s listing in November just days before the company was set to hold what would have been the world’s largest initial public offering.

Pan did not mention Ant by name in the op-ed, but noted that “non-bank mobile payment business, led by Alipay and WeChat Pay” saw growth of 75% a year between 2015 and 2019 in non-bank mobile payments. Ant Group owns Alipay and WeChat Pay is run by Tencent.

He added that fintech companies pose the same risks as others in the finance industry, and might also gather “excessive” amounts of data and infringe on user privacy.

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

Read the full opinion piece in the Financial Times here.