What's going on?

China announced plans to break up payment app Alipay on Monday, as the country�s tech sector crackdown really starts to leave its mark.

What does this mean?

Alipay � which boasts more than a billion users � is known as the go-to platform for everything from ordering food to processing payments. Now, though, it might be better known as the latest victim of a regulation-happy Chinese government, which has been looking to limit tech companies� power in the country (tweet this). And Alipay certainly isn�t short of that: its seriously profitable lending business helped issue 10% of all China�s non-mortgage loans in 2020. The government, then, has told the company to spin that segment off into a completely new app, as well as hand over its customers� data to a new credit-scoring business that�s part-owned by � you guessed it � the government itself.

Why should I care?

For markets: The bigger they are, the harder indexes fall.

Make no mistake: this is bad for Alipay-owner Ant Group, whose lending business was a key reason for trying � and, uh, failing � to list on the stock market last year. That makes a second attempt pretty unlikely, at least for now. But it�s rough for Alibaba too: the ecommerce giant � which owns 33% of Ant Group � saw its shares fall 4% after the announcement on Monday, meaning they�ve now dropped 30% this year. And since no one seems to be safe from China�s iron fist, a key index tracking the biggest tech players in China fell 2% too.

The bigger picture: Don�t say they didn�t warn you.

China�s central bank did warn the online lending industry this summer that government-approved credit companies were eventually going to have to approve every lending decision they make. Now that it�s here, though, industry execs might be nervous: they�ll have extra costs in the form of extra outsourcing, and � if the credit-scoring companies rubber stamp fewer loan applications � they might make less in revenue too.