China’s central bankers add heat to tech crackdown

Chinese politics & policy updates

China’s central bank has urged further “rectification” of the country’s fintech sector, adding more pressure to tech groups besieged by intensifying regulatory scrutiny.

The latest warning from Beijing, which did not name any companies, comes against a backdrop of strengthening headwinds for Chinese tech groups, equities markets and foreign investors in the world’s second-biggest economy.

Billionaire Jack Ma’s fintech Ant Group, China’s biggest ride-hailing app Didi Chuxing and the $100bn tutoring industry have been targeted in a snowballing regulatory crackdown that threatens to embroil other tech groups including Tencent. Delivery platform Meituan and Ma’s ecommerce business Alibaba have been subject to antitrust investigations.

The People’s Bank of China called for fintech companies to improve competition and consumer rights as it signalled stricter oversight on illegal cryptocurrency activities while also forging ahead with its own efforts to develop a digital renminbi, according to a statement released on Saturday.

Investors are bracing for prolonged uncertainty. At a top-level meeting chaired by Xi Jinping, China’s president, authorities on Friday promised stronger controls for Chinese companies selling shares overseas. The same day, US regulators said China-based groups would have to disclose more about their structure and contacts with the government in Beijing.

Despite signs of China’s economy facing an uneven economic recovery from the coronavirus pandemic, the PBOC vowed to refrain from “flood-like” stimulus measures as it pledged monetary policy stability.

The message from Beijing’s central bankers came as an important gauge of manufacturing industry health in China reflected a worse than expected slowdown in July.

China’s official purchasing managers’ index fell to 50.4 last month down from 50.9 in June, reflecting rising inflationary pressures, shrinking export growth and the effect of extreme flooding in parts of the country.

While the index was above the 50 point marker separating expansion from contraction, July marked the weakest reading since February 2020, when China was hit by sweeping lockdown measures.

Goldman Sachs analysts, who had forecast growth of 50.7, noted that China’s new export order sub-index fell to 47.7 in July from 48.1 in the previous month, the lowest since June last year.

The deceleration in Chinese factory activity followed Beijing’s warnings of an unbalanced economic recovery when it reported quarter-on-quarter GDP growth of 1.3 per cent for the three months to June.

Complicating China’s outlook, health officials are grappling with a coronavirus outbreak that has broadened from Nanjing, the provincial capital of eastern province Jiangsu, with locally transmitted cases reported across seven other provinces. China’s National Health Commission said in its latest update that there were 53 new locally transmitted cases.

Additional reporting by Sun Yu in Beijing

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