China willing to cooperate on digital financial rule making, central bank’s Yi Gang says

Financial services should be conducted by licensed companies
Technology firms offering financial services must adopt ‘same business, same rules’ approach

Banking & finance

Chad Bray

Published: 8:41pm, 7 Oct 2021

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China is willing to participate in international rule making around the digitalisation of financial services to prevent anticompetitive behaviour and increase data protection for consumers, according to its top central banker.

Cooperation is needed to mitigate regulatory arbitrage between jurisdictions and to lower cross-border contagion from financial risks, Yi Gang, governor of the People’s Bank of China (PBOC), said at the Bank of International Settlements’ “Regulating Big Tech Conference”.

“In the era of the digital economy, the integration between finance and technology is a global trend,” Yi said in a pre-recorded speech. “As technology for good is an intrinsic requirement, how to enhance innovation capacity while preventing negative effects of fintechs is a common challenge faced by us all.”

Yi’s speech comes as Beijing is clamping down on monopolistic behaviour in the country’s high-flying technology sector, calling for greater protection around personal data and pushing China’s Big Tech companies, such as Ant Group’s Alipay and Tencent Holdings’ WeChat Pay, to open up their “walled gardens” to competition.

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As part of their higher scrutiny on the technology industry, Chinese regulators have announced plans to rein in the use of algorithms, crack down on celebrity gossip and financial misinformation online, and restrict gaming by children.

That includes implementing sweeping changes to add additional oversight on companies that hold the data of 1 million or more Chinese persons and want to pursue listings in foreign capital markets and banning private tutoring, which had upended the country’s edtech sector.

The moves have unnerved international investors and caused a number of technology firms to delay or scrap planned US initial public offerings (IPOs) this year. Some companies have shifted their listings to Hong Kong, while others are waiting to see how the new rules are implemented.

Ximalaya, China’s biggest podcasting platform backed by Tencent Holdings, is one of the firms that shifted its listing to Hong Kong after it shelved its planned US IPO in September.

The tighter scrutiny by Beijing also prompted the US Securities and Exchange Commission to ask Chinese firms that use shell companies – known as variable interest entities (VIEs) – to go public on American bourses to make additional disclosures about their structures and potential regulatory risks in China.

Yi said companies that engage in financial activities must be licensed to operate, firewalls need to be set up to avoid the spread of financial risks between sectors and the “direct link” between financial information and commercial information needs to be severed.

“Platform companies conducting financial activities should follow the principle of same business, same rules,” Yi said.

He noted that the PBOC had asked technology platform operators to carve out their personal credit information businesses and to provide credit information services to financial institutions through licensed credit information agencies.

“This could help break the information monopoly and promote information sharing,” he said.

This article appeared in the South China Morning Post print edition as: China makes fintech rules pledge