Ant Group to abide to commercial banks’ guideline for online lending
Feb 22, 2021 (China Knowledge) - Chinese regulators have imposed regulations on how online lending platforms are funding their loans. Under the changes announced by the China Banking and Insurance Regulatory Commission (CBIRC), they will need to contribute 30% of their funding for loans in partnership with the commercial banks. In addition, the CBIRC will also cap how much capital commercial banks can commit to online lending platforms as well. This move is highly likely to impact the valuation of Ant Group’s microfinancing arm.
The draft of the new regulations released last year that affected major Chinese tech stocks is one of the reasons for the abrupt cancellation of the proposed USD 37 bln IPO listing of Alibaba’s online payment and lending arm, Ant Group in Hong Kong and Shanghai.
Many analysts believe that the new rules will likely force the current scale of online lending to contract significantly in China as it demands tech giants to operate fairly and to be more similar to commercial banking. Online lending businesses like Ant will need to revamp their business model drastically. Furthermore, this is going to raise the financing costs for the tech giants that are leveraging their large users base to rework their lending models.
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