China plans tighter rules for Big Tech

China will continue to have a positive and prudent approach to the rapid growth of its financial technology industry, but will keep a close watch on "too big to fail" cases in the sector, while enacting timely and targeted measures to prevent new systemic risks, a top regulatory official said.

Big Tech or big technology companies are already dominating the micropayment market in the country and enjoy an undue monopoly in terms of data resources. There are also chances that some of their financial businesses may trigger new types of risks", said Guo Shuqing, Party secretary of the People's Bank of China, the central bank, in a speech via video link to the Singapore FinTech Festival.

"A minority group of technology companies have dominated the micropayment market, which relates to broad public interest. Regulators must pay close attention to these institutions' risks, which are complicated and contagious," said Guo, who also is chairman of the China Banking and Insurance Regulatory Commission.

Most of the Big Tech companies operate cross-sector businesses with financial and technology activities. The failure of these firms may lead to systemic financial risks and it is necessary to enact timely and targeted measures to prevent the same, he said.

China will continue to promote fair market competition in the financial sector. But some giant fintech groups are "hindering fair competition and obtaining excess returns", and taking advantage of "data monopoly", said the CBIRC chairman.

Globally, regulations on large technology companies are tightening. For instance, the European Union is about to enact a new digital service act to regulate large tech companies, including the US-based Google, which was obliged to change its practices to give equal treatment to rival services.

The Bank of International Settlements has recently started monitoring large technology firms with established user bases that enter the financial sector. Regulators are also considering issues related to Big Tech's influence on market competition, financial inclusion, data protection and financial stability.

Experts said the primary concern confronting regulators is how the market would react if Big Tech encounters a breakdown and are unable to fulfill the promises made to clients and other parties concerned. Such a failure will affect the functioning of the entire financial market, or even hurt the real economy.

In the domestic fintech industry, there are several new factors that could cause problems and it is important for regulators to assess whether Big Tech firms are blocking newcomers, collecting data improperly, refusing to disclose relevant information, or misleading consumers, Guo said.

He said preventing cybersecurity risks, clarifying data ownership and strengthening international coordination for cross-border data flow are other aspects that need more attention.

Guo said there is a need for "clarifying data ownership," as Big Tech has de facto control over data and it is "necessary to clarify data rights of different parties".

A recent report, released by a national think tank, said that Big Tech in China has large groups of customers that are frequent traders. Thus their potential risks are different from traditional financial institutions and require different regulatory measures.

The country should build a long-term regulatory mechanism to supervise Big Tech businesses, clarify the "bottom lines" which cannot be crossed and keep regulatory boundaries a little more flexible, said Hu Bin, deputy head of the National Institution for Finance and Development, a think tank affiliated with the Chinese Academy of Social Sciences.