China's central bank wants a say in fintech's future as it grants new personal credit ratings license to state venture with internet firms

The Chinese central bank has granted a company between a state-owned company and two Internet companies the country's second license for collecting personal credit ratings. This suggests how the government wants to have a say in how technology interacts with finance and societal risk in the world's second largest economy.
Pudao Credit, a 1 billion yuan ($ 152.8 million) company that is 35 percent owned by the Beijing Financial Holdings Group of the Chinese capital city government, is allowed a system of providing personal credit ratings to banks and banks develop financial services industry, according to a statement by the People's Bank of China. JD Digits, the fintech unit of the e-commerce platform, will own 25 percent of Pudao, while smartphone maker Xiaomi will own 17.5 percent, according to an earlier statement.
Personal rating firms collect data from financial institutions and share that data with companies that sign up for the service and provide risk rating reports. In addition to financial data, such agencies can also access other data such as travel and phone records, which are considered alternative financial information.
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Beijing-based Pudao would be the first license awarded in 2018 to Baihang Credit, a Shenzhen-based consortium that includes the national fintech association of eight rating agencies and technology companies, including that of Alibaba Group Holding subsidiary Ant Group and Tencent Holdings controlled, expand. The composition of the stake in the second license underscores the increased scrutiny of financial regulators over consumer credit and online credit, particularly credit granted to small and medium-sized businesses.
Headquarters of the People's Bank of China (PBOC) in Beijing on September 28, 2018. Photo: Reuters alt = Headquarters of the People's Bank of China (PBOC) in Beijing on September 28, 2018. Photo: Reuters
The PBOC last month revised an online lending rule that requires stricter capital adequacy and sets a cap on the amount of such loans that can be given to individual borrowers. Just days later, Ant Group, the world's largest fintech company, had to suspend its record-breaking $ 37 billion IPO in Shanghai and Hong Kong to keep up with the regulatory change.
According to Oliver Wyman, China's consumer credit market will nearly double to 24 trillion yuan by 2025. The Ant Group has the largest market share with 16 percent, followed by Tencent-supported WeBank with less than 5 percent.
Baihang Credit has financial data on 85 million people from more than 1,700 financial institutions and has a customer base of nearly 1,000 companies, according to the latest report.
Personal credit ratings will also be a boon to Chinese banks, whose dud loans have soared after issuing a record number of new loans to fight the coronavirus pandemic this year. The overall non-performing loan ratio rose to its highest level since 2009 at the end of the third quarter as the global coronavirus pandemic weighed on tourism businesses and personal consumption.
This article originally appeared in the South China Morning Post (SCMP), the most authoritative language coverage of China and Asia in more than a century. You can find more SCMP stories in the SCMP app or on the SCMP's Facebook and Twitter pages. Copyright © 2020 South China Morning Post Publishers Ltd. All rights reserved.
Copyright (c) 2020. South China Morning Post Publishers Ltd. All rights reserved.

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