China’s tech crackdown will see “more substantial progress” by year’s end, Beijing vows
- Economic uncertainties and diminishing GDP growth also prompt warning on financial risks, while a raft of measures are being reviewed to help struggling businesses
- President Xi Jinping again stresses the importance of curbing monopolies and preventing the disorderly expansion of capital
Chinese authorities say progress is being made in their efforts to clean up the financial irregularities created by privately run tech giants and other industrial capitalists, while doubling down on vows to ensure that funding is available to struggling private businesses amid rising costs and a broad economic slowdown.
Guo Shuqing, party chief of the People’s Bank of China, pointed to promising “initial results” in the ongoing clampdown on tech giants, in an interview that Communist Party mouthpiece Xinhua published on Tuesday.
“Financial regulatory departments raised more than 1,000 issues, most of which received an active response,” he was quoted as saying. “About half of them have been tackled.
“There will be more substantial progress by the end of this year.”
Beijing has been cracking down on Big Tech for several months, in line with the country’s efforts to prevent monopolies and the disorderly expansion of capital – a mission thatwas again stressed by President Xi Jinping at a Tuesday meeting of the Politburo.
The fresh comments by Guo, who is also chairman of the China Banking and Insurance Regulatory Commission, came as market worries have resurfaced over the financial stability and future of the private economy, which employs 80 per cent of the urban workforce and accounts for 60 per cent of the national gross domestic product (GDP).
Meanwhile, China’s financial regulators have promised more financing support for the private economy. This comes as third-quarter GDP growth dropped to 4.9 per cent from 7.9 per cent in the second quarter, and as September’s producer price index rose to a record high of 10.7 per cent from a year earlier.
The country’s outstanding loans to private enterprises totalled 52.5 trillion yuan (US$8.2 trillion) at the end of August – an increase of 11.5 per cent since the end of last year – while 70 million private companies received bank loans, an increase of 30 per cent, government data showed.
Private firms, which often do not have enough collateral, can find it difficult to secure bank loans. This has forced the central bank to use policy tools such as special relending quotas, and in some cases administrative orders, to accomplish the government’s goals.
“For the next step, we’ll try to create a better financial environment for the private economy,” Guo said. “We’ll fully tap the potential of securities markets, private equity capital and angel funds to expand their financing channels in the private economy.”
China has already announced the establishment of the Beijing Stock Exchange, the mainland’s third exchange after Shanghai and Shenzhen, and it has been designated as a key platform to raise funds for private firms, including small and medium-sized businesses.
Additionally, Guo encouraged the sharing of business information such as utility bill payments, registration information and taxes so banks can more easily evaluate private firms’ creditworthiness.
He also defended the tech clampdown by saying many of the firms violated laws or regulations. And he warned against winner-take-all scenarios while emphasising the importance of both standardising and developing business.
“We don’t mean that we prefer standardisation to development, or vice versa,” he said. “Financial innovation must be based on the precondition of people-first [principles].”
Beijing shut down thousands of peer-to-peer lending platforms last year and has cracked down on cryptocurrency activities in recent months.
Guo also warned of the intrusion of industrial capital in the state-controlled financial system.
“A variety of industrial capital entered the financial industry in the past. Their illegal affiliate transactions, particularly when they control certain financial institutions, could turn commercial risks into financial risks,” he said, without naming any company.
Beijing has already dismantled Tomorrow Group, a financial empire controlled by Xiao Jianhua that includes now-bankrupt Baoshang Bank, several securities, insurance and futures businesses.
Last month, the default of Evergrande Wealth Management, the financial unit of the embattled property developer, led to a rare protest by investors in Shenzhen.
According to data from the All-China Federation of Industry and Commerce released in late September, 281 of China’s top 500 private enterprises had entered the financial sector. Among them, 111 were involved in lending businesses, 107 in banks, 53 in asset management, and 18 in securities.
Author: Frank Tang, SCMP