Chinese regulators have ordered sweeping changes to the country’s biggest payment app Alipay (支付寶), as the Chinese Communist Party attempts to rein in “the unruly growth” of the tech giants.
Alipay — with more than 1 billion users in China and other Asian nations including India — was told to spin off its profitable micro-loan business, the Financial Times reported yesterday, citing a person with knowledge of the matter.
The app allows users to pay with a traditional credit card linked to their bank or offers small unsecured loans to buy anything from toilet paper to laptops.
“The government believes big tech’s monopoly power comes from their control of data,” the source close to financial regulators told the newspaper. “It wants to end that.”
Alipay’s parent company, Ant Group Co (螞蟻集團), is China’s biggest payments services provider.
Regulators pulled the plug on the fintech conglomerate’s record US$37 billion stock market launch in November last year, after founder Jack Ma (馬雲) criticized officials for stifling innovation.
Ma’s business empire has been targeted in a wider crackdown on tech firms aimed at breaking monopolies and strengthening data security that has wiped billions off companies’ valuations.
After separating its payment and loan businesses, Alipay will have to hand over customer data used to make its lending decisions to a new credit-scoring joint venture that is partly state-owned, two sources familiar with the arrangement told the Financial Times.
Alipay did not immediately respond to questions on how the order would affect its business.
Regulators have also asked Ma’s e-commerce platform Alibaba Group Holding Ltd (阿里巴巴) and other Internet firms to stop blocking links to rival services, Chinese Ministry of Industry and Information Technology spokesman Zhao Zhiguo (趙志國) told a briefing yesterday.
The ministry has summoned executives from the country’s online platforms to emphasize the need to stop shutting out each other’s services, Zhao said.
Companies fail to realize that is a problem for users, he said without naming specific firms.
“It is unreasonable to restrict ... access of Web site links, which not only affects the user experience, but also damages rights and interests of users and disrupts the market order,” Zhao said. “Users have responded strongly against this.”
Regulators have ordered the country’s tech companies to prise open their so-called walled gardens or closed ecosystems as part of a campaign to curb their growing power.
The government has accused a handful of companies of employing blocking and other methods to protect their respective spheres: Tencent Holdings Ltd (騰訊) in social media via WeChat (微信); Alibaba in e-commerce with Taobao (淘寶) and Tmall (天貓); and, more recently, ByteDance Ltd (字節跳動) in video via Douyin (抖音).
All three block links from within their services to rivals’ content.
However, it is unclear what actions regulators want the big tech firms to take, and by when.
Alibaba and Tencent executives have said they will comply, publicly espousing a more open Chinese Internet.
Additional reporting by Bloomberg
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