China’s central bank encourages ‘controllable risks’ in fintech innovation in Alibaba’s home province of Zhejiang

A new government notice aims to improve financial services in an industry hit hard by China’s Big Tech crackdown over the past 16 months

The central government has recently signalled renewed efforts to improve economic growth, but its language on fintech innovation remains cautious

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The headquarters of Ant Group, China’s largest fintech firm, in Hangzhou on February 21, 2022. Photo: Bloomberg

Published: 7:00pm, 19 Mar 2022

Chinese financial regulators, including the central bank, and the Zhejiang provincial government are encouraging “controllable risks” in the country’s e-commerce hub to spur financial technology innovation, according to a government notice.

“The technological innovation capability of financial services should be improved,” the People’s Bank of China (PBOC) said in a draft plan released on Friday. “Under the premise of controllable risks and voluntariness, banks are encouraged to deepen cooperation with external investment institutions and actively explore diversified financial service models for scientific and technological innovation.”

The draft comes eight months after Zhejiang, home to e-commerce giant Alibaba Group Holding and its fintech affiliate Ant Group, began work on a “common prosperity” pilot zone to address President Xi Jinping’s goal of greater wealth distribution. Alibaba owns the South China Morning Post.

The remarks expressing a greater appetite for risk are seemingly a departure from the more hardline stance regulators have taken against Big Tech firms since November 2020, when Ant’s highly anticipated US$35 billion initial public offering was scuttled days before the listing.

The next month, the central government vowed to tame the “irrational expansion of capital”. Throughout 2021, China’s tech industry was hit with sweeping crackdowns targeting monopolistic practices in e-commerce, off-campus tutoring, video games, data and cybersecurity practices and cryptocurrency mining.

Fintech has continued to be a particular target of interest for regulators this year, amid fears of tech companies’ impact on financial stability.

“Chinese fintech groups have, in some cases, grown so big that their collaborations with banks are increasing contagion risks in China’s financial system,” Grace Wu, an analyst at Fitch Ratings, previously told the Post after Ant Group’s cancelled IPO, adding that she expected to see tighter regulations in the future.

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