China's central bank mulls Alibaba, Tencent payment curbs

BEIJING, March 18 (Reuters) - China's central bank is considering regulations that would significantly limit the size of payments made using the payment platforms of Chinese internet firms including Alibaba Holding Group and Tencent Holdings Ltd.

The People's Bank of China (PBOC) released draft rules last week to major banks for consultation, state media reported on Monday. These would restrict single purchases through non-state online payment services to 5,000 yuan ($810), with a monthly limit of 10,000 yuan.

They would also ban the internet companies from handling offline transactions, currently in the purview of a government-controlled monopoly, and limit transfers from bank accounts to accounts managed by the companies.

China's online and mobile payment transactions have been growing at a frenetic pace. The online payment market last year increased by 47 percent to 5.37 trillion yuan ($869.20 billion)in transactions, according to Beijing-based consultancy iResearch.

That has fuelled a clash between the financial sector and internet companies as online firms push into banking and ramp up their own financial services, offering online payment options and wealth management products.

Some analysts believe the proposed restrictions would cripple the online payment businesses of internet firms.

However, Wang Dengfeng, a manager at Alibaba affiliate Tianhong Asset Management Co, played down the proposals.

"This series of regulations is in no way a stranglehold, they're a form of standardisation," he told journalists in Beijing on Tuesday.

Tianhong also dismissed reports that the proposed rules were the result of lobbying by entrenched interests in China's state banking sector.

"We don't see this as an inter-organisational conflict of interest, or about 'who is stealing whose milk'," added Zhou Xiaoming, Tianhong's vice general manager.

Alibaba said on Sunday it had picked the United States for a long-awaited initial public offering, ending months of speculation about where it would float and dealing a blow to the Hong Kong stock exchange.

NOT OFFICIAL YET

Alibaba's payment affiliate put out a statement addressing the draft regulations on Monday. "We have reported our opinions to, and are in close communication with, the PBOC," said an official with Alipay. "Given that the document is now under consultation, we are not able to comment further."

On Tuesday, Tencent released a statement from Tenpay, its payment affiliate which also runs wealth management investment platform Licaitong.

"These draft (regulations), which are in the phase of soliciting public opinion, have not been officially put into effect yet," it said. "Tenpay has already sent its feedback to the PBOC and will keep actively communicating with the PBOC."

The statement added that Licaitong investments would not be affected by the regulations, because they are purchased with a bank card and not through a third-party payment system.

A central banker who helped draft the new proposals told Caixin Media that the new rules were intended to limit the operating scope of third-party payment companies to online shopping, while prohibiting offline payments.

In February, Alipay said it handled 900 billion yuan in mobile payment transactions from more than 100 million users last year, completing more mobile payments than U.S.-based PayPal and Square Inc combined.

Alibaba and Tencent both said recently they would launch virtual credit cards that use QR codes, similar in function to a bar code, scanned by smartphones to process payments, in partnership with China CITIC Bank Corp .

But last week, the central bank suspended the use of this type of payment by mobile devices, halting the rollout.

The draft rules would restrict one-time money transfers through individual third-party payment accounts to 1,000 yuan, with a cap on the cumulative annual transfer of 10,000 yuan.