Facing Restrictions In China, JD Digits Launches Holding Company

JD Digits will set up a financial holding company to meet with China’s regulatory rules governing the FinTech sector, Bloomberg reported Wednesday (April 7).

Citing sources familiar with the matter, the Bloomberg report said the holding unit will be “regulated more like a bank” and will function as a separate entity from JD Digits’ technology business. With this restructuring will come some job losses, the report said, with JD Digits considering divesting some of its stakes in previous investments.

This news comes just after the lapse of JD Digits’ initial public offering (IPO) last week, with the company switching its focus to technology with the addition of artificial intelligence (AI) and cloud computing.

JD Digits did not comment on the story, Bloomberg said.

The news outlet noted that regulators are also considering stricter rules for first-time share sales on the STAR board, “requiring firms to prove their technology credentials.” These rules would make it tougher for companies in the FinTech sector like JD Digits to list on the venue.

As PYMNTS reported last month, JD Digits’ parent company, Chinese eCommerce leader JD.com, sold its cloud and AI business to JD Digits for $2.4 billion.

FinTech companies in China “are navigating a rapidly changing regulatory landscape that has already required them to shore up capital and comply with tougher restrictions,” Bloomberg says. “The rules forced industry behemoth Ant Group Co. to pull its $35 billion IPO in Shanghai and Hong Kong days before its debut.”

Companies like JD.com, Ant Group and Tencent were already facing a crackdown by the Chinese government due to concerns about over-lending to consumers, a reliable source of income for these large tech companies.

Regulations adopted in January forced those three firms — and others — to share consumer lending data more widely with regulators and banks. After the Ant Group IPO collapsed, Beijing also began an antitrust probe into Alibaba, Ant’s one-time corporate parent, while also requiring the company to overhaul its consumer finance and lending business.