INTRODUCTION
There has been a lot of speculation regarding how the autocratic Chinese financial board operates and how it actually functions. Avoiding a large chain of authority, there is a direct relationship between the Chinese companies and Xingping. Jack Ma, a Chinese originated economist and a billionaire magnet, commenced with his highly successful Alibaba group long back and it’s financial subsidiary, Alipay and Ali.Finance subsequently. The corporation made a milestone by becoming the largest IPO ever of 25 Billion dollars. Even though it contributes a large volume to its economy, there is a severe tension between the giant tech and the Chinese government.
CONSERVATIVE PRACTICE
In the last 25 years, the Chinese economy has proliferated 25 times. Being a communist country, the main banks belong to the state. Even though there is the presence of private banks over there, more than half of the financial volume is state owned. That ultimately insinuates that the power lies in the hands of bureaucrats who decide who can get the loan. The agenda of the Chinese banks is not to offer these loans to households or small businesses but only to state owned enterprises. The rigid protocol makes it almost impossible for the small businesses to borrow money from the bank. Moreover even if a loan is lent, a very valuable collateral is asked as leverage. A concept replicating the idea of Pawnshop. A pawnbroker is an individual or business (pawn shop) that offers secured loans to people, with items of personal property used as collateral.
A SUBTLE INSURRECTION
Jack Ma, criticized the Chinese, stating that the pawnshop mentality of banks should be altered with the development of credit based systems offering loans to the potential small businesses. Barricading the loans to novice entrepreneurs ultimately leads to lack of invention. The only option to commence with a small business is to lend money from an informal sector charging very high interest rates against loans which sunk a lot of people into debt trap. To curb these malpractices Jack Ma offered his bank Alibaba , a portal connecting the small Chinese manufacturers to the foreign companies who wanted to buy wholesale production from them and then finally moving to the end consumers too. Like any other financial digital platform . Alipay also offers incentives , encouraging the consumers to move all it’s transactions to it , For example- offering 5% discount on every transaction. Now Alipay is the individual kingpin of the world’s digital payment platform holding 29% of e-commerce, that means dominating the world’s one third of e-commerce transactions and also the 60% of Chinese e commerce.
It also initiated with Yule Bao, a money market fund, and financial instrument. A person can deposit money into this and this money will be lent to small businesses, the depositary gets a high rate of interest on the principal amount. There is no minimum limitation to deposit. Alibaba is managing 270 billion dollars on this platform. Replicating a concept of banks , in a more convenient way for both the parties. Somehow this unforeseen development worries the Chinese government regarding their withholdings of the country’s economy, since a large number of people are switching to this platform to manage their finances and portfolio management.
BACK TO AUTOCRACY
Even though Ant Financial is a financial revolutionary , the chinese government chose to differ. The agenda of the Ant. Group is to create as many loans as possible. They take insufficient effort to evaluate the credit worthiness of the borrower, which has the likelihood of creating a lending bubble or subprime crisis. To make this evitable , the Chinese financial board tightens the protocol by asking the Ant. Financial to put up 30% of the money it lends out of its own pocket. This gives a strong motivation to the company to make sure that the borrowers are credit worthy. Controlling the banking system is as equivalent as controlling the entire economy. The autocratic Chinese government didn’t leave any stone unturned to make sure that financial authority doesn’t get bolted to tech giants.