MNI EXCLUSIVE: China May Aim Anti-Trust At Fincl Cos: Advisors

China may extend its anti-trust campaign to the financial sector following recent moves to penalise its internet giants as Beijing wants to strengthen competition and limit the systemic risk posed by mega holding companies that straddle and dominate industries, policy advisors told MNI.

China's draft anti-trust rules for the technology sector unveiled in November were aimed at ending monopolistic platform practices by companies that had expanded at a rapid pace into vital areas such as financial services.

"The financial sector will be the next focus," for anti-trust rules, said Dong Ximiao, chief analyst at Merchants Union Consumer Finance. Such a move will increase vigilance over the financial operations of tech-based giants as well as financial holding companies, many of which are called "too big to fail."

Several large conglomerates have acquired interests in financial services in recent years and many, including Tomorrow Group and HNA Group, have faced problems due to over expansion.

PENALTIES

Beijing escalated the anti-trust issue to the top of the agenda for its Dec. 11 Politburo meeting and in the statement that followed, vowed to rein in "disordered capital expansion," a reference to huge monopolies, advisors said.

Since then, the State Administration of Market Regulation, the country's principal anti-trust body, has penalised Alibaba Group Holding, Tencent Holdings, and logistics company SF Express for not seeking permission for some past acquisitions.

"The government is worried about the emergence of new conglomerates given that it is yet to clean up the mess left by Tomorrow Group and any bailout will involve taxpayers' money," said Wang Jun, an academic committee member at the China Center for International Economic Exchanges. "If these companies continue to grow aggressively, will they become the next Tomorrow Group? The government wants to reinforce its authority," said Wang.

At its height, Tomorrow Group had stakes in hundreds of listed companies after a debt-driven acquisition spree. Regulators took over Baoshang Bank, a regional lender controlled by the conglomerate, in May 2019 citing systemic risk and seized the group's affiliated insurers and stockbrokers in July this year.

SMEs

Beijing's actions reflect its priorities to foster small and medium industries and home-grown innovation, which is stifled by market-dominating companies, advisors said.

"Small and medium industries are facing greater pressure amid the economic downturn so the government needs stronger anti-monopoly efforts to maintain competition," said Dong.

Speaking at a weekend conference, Han Wenxiu, deputy head of the Office of the Central Commission for Financial and Economic Affairs, said, "Many platform operators have characteristics of financial businesses and some companies have taken advantage of regulatory loopholes." Concerns about limited competition, price discrimination, data privacy, and consumer rights have surfaced as a result, Han added.

Early in November, Alibaba-related Ant Group's plan for a gargantuan initial public offering came to an abrupt halt as the financial regulator tightened rules for microlenders in an attempt to level the playing field with banks.