China Is Strangling Its Private Champions
By taking over the deposits of platforms like Alipay and WeChat Pay, the PBOC is making a power grab. All in the name of protecting consumers.
Payback.
Photographer: Anthony Kwan/BloombergChinese electronic-payment providers like Alipay are just the type of innovative, technology-driven, consumer-focused enterprises Beijing wants to nurture. New regulations on almost $200 billion of their deposits will do just the opposite.
In the name of risk management, the People’s Bank of China in January officially became the custodian of all deposits from third-party payment groups, a transition that started in 2017. Before then, the likes of Ant Financial’s Alipay and Tencent Holdings Ltd.’s WeChat Pay had piles of cash accumulating on their platforms, which they’d invest to generate returns – without always paying interest to users. That didn’t sit well with the central bank and spurred regulation requiring the money to move into non-interest-bearing accounts under its purview.