China has announced tough rules for non-banking payment institutions amid an ongoing clampdown on the country’s $57 trillion financial sector.
China’s State Council, led by Premier Li Qiang, published rules for the supervision and management of non-banking payment institutions that include platforms appreciate Alibaba’s Alipay and Tencent’s WeChat Pay. The rules, published on Sunday, will come into force on May 1.
Among other measures, the rules carry out tougher licensing regulations and call for stronger risk management of non-bank payment platforms.
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The measures aim to hinder misappropriation of funds and other criminal activities, People’s Bank of China, the country’s central bank, and the Ministry of Justice said in a joint statement on Sunday.
State media Xinhua reported the regulations were aimed at facilitating “the sound and healthy development” of the industry.
The rules also necessitate institutions to reinforce the protection of user information and payment accounts.
They necessitate non-banking payment institutions to “guard against illicit fundraising, telecom fraud, money laundering, gambling and other criminal activities,” Xinhua said.
Firms must clearly mark prices for their services and charge “reasonable” fees the rules say. They also raise “the degree of punishment for serious violations”.
Linked to earlier tech crackdown
The joint statement also said that in cases of violations of the rules the central bank would impose “fines, restrictions on some payment operations, or order them to suspend business for rectification, up to the revocation of their payment business licenses.”
The rules come at a time when the financial sector has come under Beijing’s lens, amid a push by President Xi Jinping to eradicate national security risks from major industries.
Alipay and WeChat Pay are the most popular non-banking payment platforms in the country, with other tech firms including JD and Huawei launching their own digital payment options.
State-owned China Telecom also has its own digital payment platform known as Bestpay.
Beijing has stepped-up its scrutiny of non-banking payment platforms since 2021 when it began a wider crackdown on the financial activities of Chinese technology giants.
The tech crackdown stemmed, in part, from growing concern in Beijing over the risk of financial contagion resulting from tech firms’ empire building.
This heightened scrutiny led to the dramatic collapse of fintech giant Ant’s $37 billion IPO in November. The regulatory scrutiny of Ant only ended this year in July, with a $1.1 billion fine on the Jack Ma-founded group.
- Reuters, with additional inputs from Vishakha Saxena
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