Technology Apr 30

China fines Tencent and 10 other firms for anti-monopoly breaches

The news came a day after Tencent, Bytedance and other tech companies urged to 'review and rectify' their operations in the provision of financial services and adhere to new rules on anti-monopolistic behaviour

China fines Tencent and 10 other firms for anti-monopoly breaches
Image: Reuters.

(ATF) China fined 11 companies on Friday including tech giant Tencent for acquisitions and joint ventures as authorities target monopolistic practices. The news comes amid a crackdown on operators of fintech and online trading platforms.

Several weeks ago e-commerce giant Alibaba was hit with a $2.78 billion fine by China's market watchdog when an investigation found it had been abusing its dominant market position. A dozen tech firms, including Tencent, Baidu and ByteDance also received smaller fines in March for flouting monopoly rules.

Regulators have ramped up scrutiny of the country's high-flying tech firms this year, telling industry leaders to "rectify" anti-competitive behaviour. Beijing has been concerned about the reach of private companies into the public's daily finances.

On Friday China's market watchdog said it had identified nine cases that violated anti-monopoly regulations by creating an "unlawful concentration" of business operations. The companies were fined 500,000 yuan ($77,259) each, but the State Administration for Market Regulation said the violations did not eliminate or restrict competition.

In one case involving Tencent, the company was found to have failed to declare the acquisition of auto services firm Shanghai Lantu Information Technology.

Other companies hit with fines include Didi Intelligent Transportation Technology for not declaring a joint venture, and Suning Rundong Equity Investment Management over an acquisition.

On Thursday April 29, regulators summoned 13 companies that have internet platforms doing financial business, such as Tencent and ByteDance. The People's Bank of China said the firms were ordered to strengthen compliance with regulations.

Reining in the 'platform economy'

The move by banking and securities regulators, the central bank, plus officials from the Foreign Exchange Bureau, was part of widening efforts to rein in the country's massive e-commerce sector, as well as the clampdown on violations of the recent anti-monopoly regulations.

The "platform economy" has grown rapidly and covers e-commmerce activities ranging from banking to shopping and food delivery. 

"Internet platforms have played an important role in improving the efficiency of financial services and broadening the access of financial services to more people," the central bank said in a statement.

"At the same time, some financial services were running without licences, and there are serious rule violations in areas such as regulatory arbitrage, unfair competition and damaging consumers' interests," it said.

The companies will have to set up financial holding companies if they meet requirements to do so, as Alibaba's fintech affiliate Ant Group forced to do recently. That will mean bolstering capital requirements.

The firms were told they should draft "business rectification" plans to comply with regulations, cut "improper" links between their payment tools and other financial products, break "monopolies" in holding data, and prevent risks in internet mutual aid businesses.

They should be more compliant with their issuance of asset-backed securities, and overseas listings, the central bank said in a statement following the meeting. 

Other companies targeted by regulators on Thursday include Du Xiaoman Financial , which is backed by Baidu, as well as Meituan, Ping An-backed Lufax, 360 DigiTech,, Xiaomi Corp and's JD Digits.

Alibaba and Ant, the original targets of China's squeeze on what was until recently a loosely regulated internet economy, were not among those named by regulators on Thursday. But other companies now appear to be under focus.

After an interview with Ant Group, state media outlet Huangqiu Shibao said that “rectification is imperative, but under such circumstances, some companies seem to hesitate.”

Pan Gongsheng, deputy governor of the central bank, who presided over Thursday's meeting, said that "equal treatment" strengthens the decision-making and deployment of platform economic and financial supervision.

After listening to the entire meeting, Pan said he felt that this meeting was held at the right time.

Making the most of the situation

At the meeting, financial management officials affirmed the important role these 13 companies have played in improving the efficiency of financial services, the inclusiveness of the financial system and reducing transaction costs.

Supervision interviews, as they are known, are not aimed at anyone, but an inevitable requirement of the meeting was to show that regulators are implementing fair supervision and promoting healthy development of the whole 'platform economy', not just targeting specific companies.

Yin Zhentao, director of the Financial Technology Research Office at the Chinese Academy of Social Sciences' Institute of Finance, combed through relevant issues from previous interviews with internet companies and came to this conclusion: "Regardless of the requirements for rectification, every interview will have a prerequisite to fully affirm the positive effect of the online financial platform on the financial industry.

"This shows that the very important purpose of the interview is to clarify the supervisory attitude, clarify the adjustment requirements, and point out the direction of development.

This time, there were seven aspects that regulators said all network platforms should "conduct self-examination and correction" on.

Regulators said they want consistent thinking on issues such as standardising payment, credit investigation, internet deposits and loans, internet insurance, consumer protection and breaking information monopolies.

The Central Economic Work Conference at the end of last year and the ninth meeting of the Central Finance and Economics Committee in March this year all delivered a clear message, that there would be new action on anti-monopolistic behaviour in 2021.

This kind of supervision is not only for internet platforms, but also for traditional financial institutions. Financial holding companies affiliated to major banks are also subject to supervision.

Take advantage of the trend

At the interview site, the controllers and representatives of the 13 network platform companies all spoke. The word that many repeated was "timely".

The person in charge of Lufax, who was the first to speak, made it very clear that 'this meeting is timely and necessary'.

Government sources said there was a critical window for the development of the platform economy. Rapid development in the early stage had created good effects but also accumulated a lot of risks. If disorderly expansion and unfair competition was allowed to erode the market order, it could lead to a decline in market activity, a decline in consumer confidence, and a deterioration in the business environment, they said. 

Some companies reportedly said the new regulatory requirements would help prevent industry risks and generate long-term healthy development of businesses. There would be some pain, but it could help businesses not to take detours, so they avoid major disasters.

Beijing's crackdown on fintech was triggered by a speech in October by Alibaba founder Jack Ma criticising the country's regulatory system, which led to the scuppering of Ant's record $37 billion initial public offering that continues to reverberate.

"Tighter supervision is not only aimed at the Ant Group, and the problems of the Ant Group are definitely not an exception," the state-run China News Service wrote in a commentary on Thursday. "Many platform companies have irregularities to varying degrees behind their rapid expansion over the years."

Earlier this month, China's antitrust watchdog called in nearly three dozen internet companies to warn them to stop using any banned practices, such as forcing vendors to use their platform exclusively.

At present, China's digital economy ranks second in the world, and the added value of core industries of the digital economy accounts for 7.8% of GDP. Applications for mobile payment, online banking, internet insurance, and internet credit are all advanced.

In this round of digital transformation, China could even have taken the lead.

With reporting by Reuters


China's central bank and Ant team up to develop digital yuan platform

China widens scope of banking sector stress tests

China regulators central bank big tech platform economy fintech tencent bytedance regulatory clampdown