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TechPolicy

Why China’s central bank leads antitrust drive and how this may affect Alipay, WeChat Pay

  • The People’s Bank of China’s draft antitrust regulation forms part of its campaign to curb the rise in risks to the nation’s financial system
  • The central bank has said its antitrust initiative was aimed at closing regulatory loopholes in payment services

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The People’s Bank of China’s antitrust initiative marks the latest example of Beijing’s increased focus on curbing financial risks. Photo: EPA-EFE
Josh Ye,Xinmei Shen,Coco FengandJane Zhang
The People’s Bank of China (PBOC), the country’s central bank, has never been a major driver of domestic antitrust measures; its tasks involve carrying out monetary policy and regulating financial institutions. It has had no public record of being involved in any antitrust lawsuit or investigation since the country’s antitrust law came into effect in August 2008.
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The PBOC, however, is now flexing its regulatory muscle, putting “nonbank payment institutions” on notice that it could wield antitrust tools to discipline them.

It has drafted new regulation that seeks to determine whether such institutions could qualify as monopolies, which could potentially affect the operations of the country’s top mobile payments providers, Ant Group’s Alipay and Tencent Holdings’ WeChat Pay. Ant Group is an affiliate of Alibaba Group Holding, which is the parent company of the South China Morning Post.

The draft, which was published on Thursday to solicit public feedback through February 19, uses both “nonbank payment service” and “nationwide electronic payments” to describe the two markets that would fall under the PBOC’s purview. The central bank, according to its draft regulation, would allow it to determine a monopoly in the payments field and recommend suitable rectification, including breaking up these enterprises, to the antitrust authority under the State Council.

“It seems the central bank has found antitrust as a quite usable institutional tool [to regulate financial technology companies], but the tool is not in its own hands,” said antitrust lawyer Annie Xue, a partner at Beijing-based Gen Law. “Now it is telling [mobile payment institutions] ‘if I find you don’t behave well, I will remind antitrust regulators to use the tool to discipline you’.”

The central bank’s antitrust initiative marks the latest example of how Beijing’s increasing focus on financial security is poised to reshape the world’s second-largest economy and No 2 capital market.

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