These companies have a major shadow lending problem with risks underwritten by the state.
People put money on alipay because the interest rate is actually pretty good.
Chinese Economics Thread
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People put money on alipay because the interest rate is actually pretty good.
Exactly. The government is trying to contain risks of these companies becoming TBTF (too big to fail). Look at US in the last 25 years since Clinton's banking deregulation. Most of major companies (Dow or S&P 100) are TBTF. And they know it. And they can level up like no tomorrow. The Chinese government cannot afford that. If in an unforeseen and unfortunate situation, the Chinese government bailed out Ant or BABA, the Chinese public may go ChenSheng or WuGuang.
These companies are trying to hold the Chinese people and CCP hostage like what happened in the US
Both Tencent and Ant are gonna get some new rules put in place.
Risk and monopoly are the two main factors that force the Chinese regulators to take a hardline toward Ant. Ant monopoly is easy and straightforward.
As for risk, you just need to go back to HNA, Anbang, and Wanda. Average people just don't understand the amount of risks these companies have accumulated and exposed. The Chinese government understands the risks these companies pose and forces them to unravel their holdings especially in the overseas. Except Wanda, both HNA and Anbang have been taken over by the Chinese government due to their debts. If the Chinese government hasn't taken actions early on, then it would only have two choices either lending them more money or let them default. Now the risks have been contained because of the Chinese government foresight and proactive actions.
The issue is too big to fail for fintech company like Ant. Wall st banks were too big to fail. The Chinese big 4 banks are too big to fail. That's why the big 4 Chinese banks are very conservative and have many constraints. Ant lending and investing products have become more like Anbang and HNA. Over leverage and too good to be true return rates are posed to become problems later on.
China didn't only crack down on Ant. Companies such as Evergrande Group has enormous amount of debt and the Chinese government has asked banks not to loan them more money. Triangle debt dilemma which is a big SOEs issues have also become a problem for major private companies such as Evergrande Group. Many other private companies and their founders have lent enormous amount to Evergrande Group and now were forced to extend the loans or risk default.
As for risk, you just need to go back to HNA, Anbang, and Wanda. Average people just don't understand the amount of risks these companies have accumulated and exposed. The Chinese government understands the risks these companies pose and forces them to unravel their holdings especially in the overseas. Except Wanda, both HNA and Anbang have been taken over by the Chinese government due to their debts. If the Chinese government hasn't taken actions early on, then it would only have two choices either lending them more money or let them default. Now the risks have been contained because of the Chinese government foresight and proactive actions.
The issue is too big to fail for fintech company like Ant. Wall st banks were too big to fail. The Chinese big 4 banks are too big to fail. That's why the big 4 Chinese banks are very conservative and have many constraints. Ant lending and investing products have become more like Anbang and HNA. Over leverage and too good to be true return rates are posed to become problems later on.
China didn't only crack down on Ant. Companies such as Evergrande Group has enormous amount of debt and the Chinese government has asked banks not to loan them more money. Triangle debt dilemma which is a big SOEs issues have also become a problem for major private companies such as Evergrande Group. Many other private companies and their founders have lent enormous amount to Evergrande Group and now were forced to extend the loans or risk default.
If I may add, there are an additional risk from the US with their penchant disregard for international law and private enterprise's rights . They can and will sabotage ANT at will if it serves their purpose and cause any sort of burden on China. ANT needs to account for such contingencies and be resilient against such malicious and predatory practices. ANT applications could possibly banned like Tiktok. They can also be sanctioned from financial and banking system. ANT could also be force to be sold to American corporations. etc.
AssassinsMace
Lieutenant General
Shouldn't China be in the dark by now? If China was experiencing a electricity shortage because Chinese stupidly didn't think how they would have no electricity from not buying Australian coal, they should've ran out by now and the Western media would be reporting economic activity in China has ground to a halt yet no news.
To me this is a great example of how in China the government controls corporations instead of the other way round