The Chinese tech giant said it is looking into whether Chinese regulators will force it to house its financial businesses in a holding company. Two financial holding company licenses have recently been issued in the country.

Why should we care?
Coming less than two weeks after the state fined Tencent for AML and KYC violations on its WeChat Pay platform, this latest move suggests that Chinese regulators have effectively developed a carrot-and-stick strategy to shape fintech more strictly within the country. The Peoples’ Bank of China, the country’s central bank, is interested in reining in tech companies that conduct bank-like services. Tencent may need to include its banking, credit-scoring, securities, and insurance services within this holding company. “Recently there have been two financial holding company licenses that have been issued. We felt after that we should have a clearer picture on what are the criteria for inclusion into [a] financial holding company and whether we qualify or not,” said Tencent President Martin Lau. “We are proactively engaging in that discussion.” He also framed the development diplomatically; regulators hope to “guide a healthier and more sustainable development” of finance in China, he said, though the holding company restructuring would “involve some organizational changes.” It remains to be seen how WeChat Pay will function if or when this transition occurs, and whether regulators will attempt to further cleave the holding company from Tencent over time.