Regulating digital platforms in China

 •  Filed under China, digital markets

Today, a China Daily article described government complaints about Uber's subsidies to drivers:

Speaking at a news conference in Beijing, he [the minister of transport] said the subsidies are a short-term tactic to gain a bigger market share. "The apps are profit-driven and the subsidies will not be handed out forever," he said.

Taxi-hailing app Didi Kuaidi, backed by Internet giants including Alibaba Group Holding and Tencent Holdings, is in fierce competition with Uber Technologies in China. The cash-rich companies are heavily subsidizing passengers and drivers to gain a bigger market presence.

Uber CEO Travis Kalanick said earlier this year that the company lost more than $1 billion in China last year from subsidizing users.

Didi Kuaidi did not disclose the amount given in subsidies. Before a high-profile merger of two local apps last year, the Chinese company had pledged to subsidize projects worth more than 2 billion yuan ($310 million).

Data from the same article:

  • Nearly 22 million people booked car journeys through mobile apps in the first half 2015.
  • "Didi Kuaidi accounts for more than 80 percent of the market share in China".

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P2P lending

The FT reports that the PBOC opposes the use of online loans for some purposes, like using them as down payments:

In comments at the weekend Zhou Xiaochuan, head of the People’s Bank of China, denounced loans for down payments on homes as illegal. Pan Gongsheng, a central bank vice-president, said regulators will act against the peer-to-peer companies that grant such loans.

“I have been very nervous about this because it reminds me of the US subprime crisis,” said Xia Le, chief economist for Asia at BBVA. “In the past, people buying houses paid using their own money but now they’re using speculative shadow finance.”

On P2P failures: Risky business of P2P lending and a ‘battle we must not lose’ | South China Morning Post:

According to Wdzj.com, 106 online P2P lenders absconded, suspended business, suffered liquidity problems or were subject to investigations in December. In November that figure was 79 and in October, 47.

... Guo Tianyong, a professor at the Central University of Finance and Economics, said the lack of regulation was a major cause of this year’s market disorder and that further fallout could spark investor panic and endanger financial stability

See also: How Chinese investors lost their money