China pushing for digital renminbi to stop growth of Alibaba, Tencent: analysis
China is pushing for the development of the digital renminbi to prevent e-commerce giants Alibaba and Tencent from expanding further, according to an analysis by a Japanese newspaper.
The country’s electronic payment market was dominated by Alibaba’s Alipay, which had a 55% share, and Tencent’s WeChat Pay, with 39%, an article published by Nikkei said.
China is increasing regulatory oversight of the financial sector, which may threaten the existing digital payment systems of Alibaba and Tencent.
The Nikkei article cited the example of the Unified Payments Interface introduced in India in 2016, which linked bank accounts to smartphone transactions. UPI users can skip third-party platforms by scanning shops’ QR codes with their phones and making payment from bank accounts to payees. Other payments using UPI, such as Google Pay and retail giant Walmart’s PhonePe, have become mainstream.
UPI threatened the Paytm app, which was similar to Alipay and was an investment of Alibaba’s Ant and Japan’s SoftBank, Nikkei said.
New payment apps would appear as China introduced the digital renminbi, Nikkei said. The oligopoly of Alibaba and Tencent might collapse, it added.
Although China was considering imposing a digital services tax on large IT companies, digital payments had become a key part of life in the country and over-regulation would hit the retail sector, online shopping and other businesses, Nikkei said. The Chinese government was pinning its hopes on the digital renminbi to change the situation.
The digital renminbi is on trial in Chengdu, Shenzhen, Suzhou and Xiong’an New Area. Four million transactions worth two billion yuan (US$306 million) had been recorded, People’s Bank of China governor Yi Gang said.
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