China's digital economy faces mindset challenge with Li Keqiang's internet push at odds with new online payment regulations
As the pace of innovation picks up, it's time for China's old order to embrace new technology
It's official. China is now at war, a war between the old economic establishment and the new camp of business backed by technology giants and innovators.
On one side, Premier Li Keqiang has been pushing his so-called "Internet Plus" strategy for the past few months, personally encouraging the public to do business and shop online. But on the other side, the public has also heard quite different opinions from the central bank.
Last Friday, the People's Bank of China (PBOC) shocked the internet industry in the world's No2 economy by publishing a draft of regulations to limit daily and annual online transactions of third-party payment tools such as Alibaba's Alipay, China's version of PayPal.
If the PBOC puts its new regulations into practice, it would hurt Alipay's business significantly and also the entire business-to-consumer (B2C) system in China.
The central bank has proposed limiting third-party daily online payments to between 1,000 yuan (HK$1,246) and 5,000 yuan, depending on different levels of security measures the third-party payment tools implement. The annual spending limit will be capped at 200,000 yuan. However, these proposals, which aim to improve cybersecurity, will not affect online payment tools provided by state-owned commercial banks via China UnionPay, which is backed by the PBOC.
China has about 430 million online shoppers, according to official statistics, and the number is estimated to rise to 500 million for the first time this year following Beijing's big push for internet-related business growth.
Online shopping has been extremely popular among the tech-savvy younger generation who use new payment tools like Alipay more than traditional online banking systems, which many complain have less user-friendly interfaces and more complicated verification processes.
While cybersecurity is clearly important, using it as an excuse to suddenly put a regulatory ban on internet spending seems contradictory to the premier's aim to transform China's old economic structure and boost domestic consumption.
Online payments are not the only issue surrounding new technology. We've also seen trouble between traditional businesses and more innovative ways of working and living; for example, the ongoing regulatory battle between the likes of Uber, which is widely described as a "disruptive" innovation globally, and traditional taxi businesses.
Any kind of change can be disruptive to an existing order to a greater or lesser degree. The key to success in the digital economy is mindset. It's time for premier Li to have a rethink and show the world his "Internet Plus" push is more than just another political slogan in China.