PBOC tightens screws on internet finance
Central bank is reportedly looking to cap transfers via third-party accounts at 1,000 yuan as it increases controls on the booming sector
The People's Bank of China has issued two drafts for consultation aimed at cracking down further on internet finance by limiting online shopping and money transfers for online-payment service providers, according to mainland media reports.
The stringent new rules will cap transfers via third-party payment accounts at 1,000 yuan (HK$1,260) per transaction, while total transfers in a year can be no more than 10,000 yuan.
For shopping, the draft rules restrict single purchases using third-party payment accounts to 5,000 yuan, with a monthly limit of 10,000 yuan.
An official in the PBOC's news department said he was unaware of the report.
Tencent declined to confirm the reports and an Alibaba Group spokesperson said they were not able to comment but "have reported our opinions to, and are in close communication with the PBOC".
Liu Xingliang, the chairman of Hongmai Software, a Beijing-based internet data analysis firm, said that if the reports were accurate it was terrible timing for Alibaba as it came before its much-anticipated initial public offering on Wall Street. The e-commerce giant on Sunday announced it would pursue its high-profile IPO in New York, with expectations of raising up to US$15 billion. The limitations on transaction amounts could be "a calamity" for Alibaba, according to Liu.
Qian Haili, an analyst at Hangzhou-based China E-Commerce Research Centre, said the reported rules were "unreasonable" and if implemented, would shut down a large number of e-commerce enterprises. "It will create huge dissatisfaction among online shoppers and shop owners," Qian said.
She said the central bank was tightening restrictions on third-party payment platforms because the sector had grown rapidly and posed a threat to the traditional business of banks and China UnionPay, the national bank card association.
"If one account can only put in 10,000 yuan a year, the investment arms like Alipay's Yu E Bao and Tencent's Licaitong will have little meaning."
As of mid-January, Yu E Bao said it had 250 billion yuan in assets under management. Alipay, an affiliate of Alibaba, launched the Yu E Bao financial platform that allows consumers to invest their spare money in a market fund offering a higher return than bank savings accounts.
The new regulations will limit the scale of the fund. "How much return can 10,000 yuan generate?" Qian asked.
The central bank last week halted the introduction of virtual credit cards, which mainland internet titans Alibaba and Tencent planned to launch this week. It also suspended payments made through scanning a code called Quick Response.
Beijing has been pushing domestic consumption in the hope the economy will become more balanced and rely less on export and manufacturing. Dong Yizhi, lawyer at Yatai Law Firm, said the PBOC had previously issued two consulting drafts on the management of payment providers' online services.
Tencent dropped 3.1 per cent to close at HK$546.50 yesterday, while the Hang Seng index fell by only 0.3 per cent.