Why is the Chinese government cracking down on fintech?

4 min readNov 30, 2020

This appeared in The Millennial Source

The Chinese government is seeking to rein in the fintech industry, which for years has been under regulated when compared with mainstream banks and financial services.

The Chinese financial services company Ant Group, an affiliate of Jack Ma’s Alibaba Group Holdings Ltd., was expected to hold a record-breaking initial public offering (IPO) in November, potentially raising in excess of US$30 billion and boosting the company’s valuation to above US$300 billion.

Instead, following a meeting between Ma and Chinese financial regulators, the Shanghai Stock Exchange notified Ant that it no longer met the requirements for its proposed listing. The deal was off.

But Ant’s tumble from the high expectations its potentially record-breaking IPO had set is a consequence of a broader development in China.

The Chinese government is seeking to rein in the fintech industry, which for years has been under regulated when compared with mainstream banks and financial services.

This has big consequences for the country’s burgeoning fintech industry, which has profited greatly from operating under different rules and regulations than mainstream commercial banks.

And yet the arrival of this new regulatory focus should come as no surprise. Many growing Chinese industries remain underregulated while they are allowed to catch up to global competitors. Once they do, regulations are heavily imposed.

China’s fintech boom

Fintech, or financial technology, constitutes a massive yet still growing industry in China.

China has on occasion been dubbed a quasi-cashless society, given the widespread use of digital payments apps and methods within the country. In the first 10 months of 2017, digital financial transactions amounted to some US$12.77 trillion.

It is in digital payments that fintech firms have grown to be Chinese giants. Ant Group, in particular, provides the popular payments app Alipay. This app alone boasts some 700 million monthly active users throughout China.