Whatâs Going On Here?China announced plans to break up payment app Alipay on Monday, as the countryâs tech sector crackdown really starts to leave its mark. What Does This Mean?Alipay â which boasts more than a billion users â is known as the go-to platform for everything from ordering food to processing payments. Now, though, it might be better known as the latest victim of a regulation-happy Chinese government, which has been looking to limit tech companiesâ power in the country (tweet this). And Alipay certainly isnât short of that: its seriously profitable lending business helped issue 10% of all Chinaâs non-mortgage loans in 2020. The government, then, has told the company to spin that segment off into a completely new app, as well as hand over its customersâ data to a new credit-scoring business thatâs part-owned by â you guessed it â the government itself. Why Should I Care?For markets: The bigger they are, the harder indexes fall.
Make no mistake: this is bad for Alipay-owner Ant Group, whose lending business was a key reason for trying â and, uh, failing â to list on the stock market last year. That makes a second attempt pretty unlikely, at least for now. But itâs rough for Alibaba too: the ecommerce giant â which owns 33% of Ant Group â saw its shares fall 4% after the announcement on Monday, meaning theyâve now dropped 30% this year. And since no one seems to be safe from Chinaâs iron fist, a key index tracking the biggest tech players in China fell 2% too.
The bigger picture: Donât say they didnât warn you.
Chinaâs central bank did warn the online lending industry this summer that government-approved credit companies were eventually going to have to approve every lending decision they make. Now that itâs here, though, industry execs might be nervous: theyâll have extra costs in the form of extra outsourcing, and â if the credit-scoring companies rubber stamp fewer loan applications â they might make less in revenue too. | 