What's going on?
The Chinese central bank proposed new regulations earlier this week that could break up the biggest players in the online payments industry, and… well, investors have done the math.
What does this mean?
The new rules would mean China’s central bank could advise regulators to break up a “non-bank payment company” if it controls more than half the market, or any two that hold two-thirds of the market between them. That’s not ideal news for Ant Group and Tencent, whose respective payment platforms – Alipay and WeChat Pay – control an estimated 55% and 40% of China’s mobile payments sector.
It’s not the first time that China – worried that a slip-up from one dominant company could hurt the country’s entire financial system – has cracked down on fintech. The country’s central bank urged regulators to investigate Alipay and WeChat Pay last year, while Ant Group’s initial public offering – which would’ve been the world’s biggest – was put on hold in November.
Why should I care?
For markets: Do not pass Go.
Alibaba mightn’t be too happy about the regulatory overdrive either: the Chinese ecommerce giant owns a substantial stake in Ant Group, and is itself the target of a separate anti-monopoly investigation launched in December. This new regulatory push, then, is making its investors even more nervous, which might be why the company’s shares are 10% below where they were before Ant Group’s IPO was suspended.
The bigger picture: Bide ‘n’ seek.
China isn’t the only one taking a hard line on tech companies: European and American regulators have also launched new rules for and investigations into Big Tech in recent months. And considering the new US president is likely to come down harder on those companies than the previous one was – and considering Europe has said it’ll help – things are probably going to get worse for them before they get better.