Freeing of platform economy can only be good for China’s growth
- With the crackdown on fintech firms over, the sector must look forward and realise its full potential in driving China’s recovery
Beijing’s crackdown on the roller-coaster development of the platform economy may not be held to blame for China’s economic slowdown. But nor has the constraint on the sector done anything to speed up recovery from the pandemic and control measures that are largely to blame.
It is good therefore that the crackdown is officially over, freeing the platform economy to look forward and realise its full potential for driving the recovery and sustainable growth.
The “rectification” of violations of laws and regulations by fintech companies, ending in restructuring and fines of up to 7 billion yuan (HK$7.6 billion; US$976.8 million) on the six biggest, has taken 2½ years. The central bank has brought the crackdown to a close with the massive fines and resumed “normalised management” of the industry.
The official language understates the significance of the platforms’ official rehabilitation. This is to be found in a policy statement from the National Development and Reform Commission (NDRC), the country’s top economic planner, putting the fintech sector front and centre of national economic goals.
The NDRC makes it clear the platform economy is seen as critical to China’s overall economic development, and is expected to help lead the way in advancing innovation and competitiveness. This is a very clear policy signal not only confirming that the crackdown is over, but also that Beijing sees the platform economy as core to national strategy and is prepared to give it very active support.
It is an important step in China’s economic development. The government is essentially changing gear to put less emphasis on regulation and keeping control of a dynamic economic sector, and holding fintech companies up as national champions of economic progress.
It reflects confidence that the companies now know well the red lines they were seen to have overstepped in the past. The leadership and regulators have also come to realise the importance of the platform economy to enhance competitiveness, create jobs and boost economic growth, especially with the country facing so many challenges.
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Leading internet giants including Alibaba, owner of the South China Morning Post, Tencent and Meituan have all received hefty fines and undergone heavy business restructuring since 2020 as part of Beijing’s regulatory crackdown.
So important is the platform economy’s role in innovation and competitiveness it can expect a measure of continued scrutiny and oversight, with the NDRC saying the next step is to release typical investment cases for platform companies and support them to play a more active role in economic development and job creation.
