Under draft rules proposed on Wednesday, the People’s Bank of China (PBOC) can advise the state council’s antitrust committee to stop companies abusing their dominant position or even break up a non-bank institution if it “severely hinders the healthy development of the payment service market”.
The PBOC’s proposed rules coincide with a wider government clampdown on the financial activities of Chinese technology giants amid growing concern over the risk of financial contagion resulting from their empire building.
This heightened scrutiny led to the dramatic collapse of fintech giant Ant’s $37 billion IPO in November.
“The finance industry is becoming more and more dependent on information technology, leading to a growing urgency in ramping up antitrust efforts in this sector,” said Liu Xu, a researcher at the National Strategy Institute of Tsinghua University.
The PBOC will hold talks with institutions over their market dominance once a single player’s market share reaches a third of the total non-bank payments industry or when the market share of two players combined reaches half of the total.
It will also identify institutions as having a monopoly once a single player garners more than half of the market in nationwide electronic payments, which also includes online and mobile banking payments.
Non-bank payment service providers must also comply with the PBOC’s anti-money laundering and anti-terrorism requirements. If these are severely breached, the central bank can revoke the player’s licence under the new rules.
To fend off systemic risk, the central bank will be obliged to draft new rules to list and regulate systemically important non-bank payment institutions, the draft rules say.
The PBOC last year urged China’s antitrust agency to launch an investigation into Alipay and WeChat Pay, alleging that the two companies have used their dominant positions to quash competition, Reuters reported in July.
Reuters has been unable to establish whether any investigation was started by the antitrust agency under the State Administration for Market Regulation.
Ant and Tencent did not immediately reply to Reuters requests for comment.
(Reporting by Zhang Yan, Cheng Leng, Stella Qiu and Ryan Woo; Editing by Alexander Smith and David Goodman)