SHANGHAI -- Food delivery company Meituan is shutting down a program that covers medical expenses as Chinese technology enterprises face growing government pressure to leave the financial sector.
Described as a mutual aid platform, Meituan Huzhu launched in 2019, partly in response to a similar service from what is now Alibaba Group Holding affiliate Ant Group. Meituan had hoped to tap its nearly 500 million food delivery customers to make inroads into the new field.
But it recently announced on the Meituan Huzhu app that the service would officially end in late January.
Meituan Huzhu covers roughly 100 health conditions, or medical expenses above a certain threshold. It had attracted around 30 million people, largely from Meituan's food delivery customers and workers.
Chinese financial authorities have long been concerned about potential issues associated with mutual aid platforms, such as operators embezzling funds. Insurers and mutual aid providers also tend to face a surge in claims about five to 10 years in, possibly impacting their ability to make promised payments over the medium to long term.
Meituan's exit is the result of a financial-sector crackdown that has only accelerated after Chinese authorities began requiring all companies offering financial services to obtain licenses.
The move was largely in a response to Ant, which had extended more than 2 trillion yuan ($309 billion at current rates) in loans through its Alipay smartphone app. Still, the likes of Meituan have felt the heat as well.
Ant is reevaluating its mutual aid operations amid mounting pressure. The People's Bank of China and other authorities held a second round of regulatory talks with Ant in December, strongly urging it to restructure financial operations. Ant now plans to nestle its lending, brokerage and insurance operations under a new holding company.
Ant is considering spinning off mutual aid operations altogether, since maintaining a similar level of capital as an insurer to back the business could significantly impact its earnings. Other tech companies, like Tencent Holdings and Didi, could also dump or revamp their mutual aid businesses.
Many are already backing out of the financial sector. Tencent and JD.com each halted a service that allows users to shop around for bank deposit accounts.
Financial authorities issued a notice on Jan. 15 that essentially banned the service, with further restrictions expected to follow. There is concern that the crackdown on technology platform companies could set back innovation.