Ant loses, and small Chinese banks lose too

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Brian Adam
Professional Blogger, V logger, traveler and explorer of new horizons.
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The Chinese regulator requires internet credit providers to finance 30% of the loans they make in cooperation with commercial banks.

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Small Chinese banks will be Ant’s traveling companions in his misery at the action of regulators. The China Banking and Insurance Regulatory Commission (CBIRC) released new rules on Saturday requiring internet credit providers to finance 30% of the loans they make in cooperation with commercial banks. It’s a manageable thing for Jack Ma’s company, though it will dramatically lower the $ 300 billion valuation he was aiming for. But there are many small lenders that depend on their allies in the financial and technology sectors to grow. The new rules also limit that possibility. As expected, the CBIRC is forcing Ant and his peers to put money for consumer credit on the internet. This is about $ 13.4 billion for Ant, according to a Breakingviews calculation based on the historical volume of its consumer loans.

All this will stunt Ant’s growth, and will affect a business that generated about 29,000 million yuan in the first half of 2020, 40% of its total turnover. While larger institutions like the Industrial and Commercial Bank of China may be happy to see Jack Ma’s business being tightened, smaller banks, especially those operating in economically impoverished areas, will regret these new restrictions.

Authorities have reason to worry that small local banks will fall into the clutches of financial and technology giants, and may further toughen rules. But previously, in provinces where growth is timid and banks are forced to consolidate, loan officers could seek out consumers interested in obtaining a loan in other parts of the country through Ant and his friends. No longer: the new rules prevent non-national banks from using online partners to grant loans outside their jurisdiction. Beijing’s heavy hand with the giants also hurts the little ones.

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