China wants Ant Group to refocus its payroll business

The statement from the People’s Bank of China came after a meeting Saturday between the central bank, Ant representatives, and China’s securities, banking and foreign exchange regulators. It was presented as a Q&A by PBOC vice-governor Pan Gongsheng.

The public recall came less than two months after Beijing pulled the plug on Ant’s planned public offerings in Hong Kong and Shanghai on November 3rd. The prestigious IPO was set to raise at least $ 34 billion — valuing Ant at more than $ 300 billion — but Chinese President Xi Jinping personally decided to suspend the deal. after Mr Ma introduced government leaders with a speech in which he criticized financial management, The Wall Street Journal reported.

Ant said he valued the guidance and would adhere to the regulatory requirements. The company said it would develop a timetable and action plan.

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, e-commerce giant Mr Ma, who co-founded it, also came under pressure recently. Their American investment receipts fell 13% on Dec. 24 after China launched an anti-trust investigation into the company. Alibaba has a third of Ant.

Chinese authorities have previously retreated in other large companies after expanding strongly overseas or into businesses that were not close to their main activities, and accepted what regulators saw as too much. danger.

HNA Group Co., an airline company that was previously on a global construction spree, was told by Beijing a few years ago to refocus on its core aerospace industry. It has lost assets from a commitment in hotel and finance companies, and recently reached a contract to sell a technology product dispenser.

Anbang Insurance Group, which had built U.S. hotels and other properties overseas using money raised from investment products sold by it, was seized by Chinese regulators in 2018 and forced to re- focus on their core business of providing insurance. The business is now operating under a different name after leaving government hands earlier this year.

For Ant, the order from regulators means that one of the most valuable startups in the world will have trouble getting further access to profit areas it was previously aiming for growth. The company could take back some of its businesses, which would affect its profitability and market valuation when it tries to go public again.

Ant owns Alipay, a popular mobile payments and lifestyle app that has over a billion users on mainland China and handled the equivalent of $ 18 trillion worth of transactions in the year to June 2020 .With Alipay, Chinese citizens are able to use their smartphones with their smartphones to pay for bus and taxi fares, groceries, online shopping, utility bills and many other transactions without the use of corporate money. Many Alipay users also buy money from each other, insurance and other investment products through its app.

Through Alipay, Ant has also started short-term loans to consumers and small businesses that traditional banks have not noticed. Its personal lending business, in particular, has grown rapidly in recent years and has become the company’s largest revenue driver.

Regulators have struggled with this business as most of the loans Ant helps are funded by commercial banks – including many lenders small and secured companies – which carry almost all the risks from lenders. Ant, on the other hand, collected taxes while taking very little risk. In the first half of this year, Ant’s digital lending business accounted for 39% of the company’s 72.5 billion Yuan, equivalent to $ 11.1 billion, in revenue, according to the forecast He has an IPO.

The central bank’s statement on Sunday said that despite Ant’s crimes, it recognizes the company’s financial and technological innovations, and the provision of inclusive financial services.

As a company with “significant influence” in these areas, Ant must adhere to national laws and regulations and integrate its corporate development with national objectives, the statement said.

At the meeting, regulators made several other requests from Ant, the central bank said. These included urging him to protect personal data in his credit business, improve corporate governance, and work sensibly in his financial services businesses.

Beijing has become tougher on fintech platforms in recent months. Rules introduced in September require Ant and other conglomerates to set up financial property companies, effectively leading them to raise large capital to support their existing businesses. in areas such as payments and borrowing. Administrators confirmed this request to Ant on Saturday.

Individual draft rules would also require companies like Ant to leverage more of their own capital to support online lending activity.

Xiaoxi Zhang, an analyst at Gavekal Dragonomics, said for now there was no order to break Ant, buying time for the company to order their house. “It looks like the authorities are usually asking Ant to bring the focus of their business back to pay, and explore other financial services such as online lending,” Ms Zhang said.

Ant has started to take a risk back in his loan business. On December 23, Ant said its Huabei consumer lending platform had cut credit limits for some younger lenders to “encourage more reasonable spending habits.”

Write to Xie Yu at [email protected]