China’s tech giants, with Alibaba and Tencent at the forefront, are transforming China’s economy, and doing so at a much faster pace than their American counterparts, but have they become too powerful?

As we noted several days ago, Alibaba’s Jack Ma does not seem so worried about political challenges to Alibaba coming from state-owned enterprises. Rather, he seems to think of himself as a key element of state-owned bank reforms.

“We are pushing that and this is why a lot of banks don’t like us in China,” Ma says. “We’re not necessarily interested in buying the banks to change it, but because of us chasing them around, they reform.”

In many ways what they are doing dovetails with the central government’s goals of restructuring China into a service oriented economy, and making the country a leader in technological innovation. Because of this, industry leaders have clearly been given the green light thus far to forge ahead with their disruptions.

But Matthew Brennan of China Channel, a consultancy that has followed Tencent since it was listed in 2014, tells the Financial Times that he agrees with those who believe it and Alibaba have become too powerful.

Alipay and WeChat pay says Mr Brennan, for example, are good for the economy and put China at the cutting edge of mobile payments. But at the same time “they are undercutting the SOE banking sector and have done so very rapidly, and that could lead to instability . . . too much disruption going on could spill over into unrest. So maybe they [think they] need to clip their wings a little,” adds Mr Brennan.

Warning signs, as the FT writes, seem to be largely concentrated in the payments, financial services and gaming industries:

Mobile payment and financial services

Mobile payment systems were ordered to route their back-end transactions through a central clearing platform, bringing them back into a world of conventional banking which they have effectively disrupted…

“I think it is understandable the time has come,” [Kai-Fu Lee who previously managed Google’s China operations] says. “Because if you want to track money laundering and tax evasion, it’s almost untraceable [via these payment systems]”…

Curbs have been placed on the wildly popular payments and financial services offered by Tencent and Alibaba, limiting the assets their money market funds can invest in and routing clearing of payments via the banks. Yu’E Bao, the world’s biggest money market fund, which is majority owned by Ant Financial, has twice this year cut the maximum limit for individual accounts from Rmb1m to Rmb100,000 under pressure from regulators.

Gaming

Tencent, the maker of the fantasy role-playing game, responded by curbing the hours children could play — one hour a day for the under 12s and a two-hour maximum for those aged between 12 and 18 — after what appeared to be a co-ordinated attack by the authorities in July. About $15bn was lost off its market capitalisation. As for the children, many fired up fake IDs or borrowed those of their parents to get round the restrictions and feed their addiction.

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