Eyes China Shrinking Jack Ma Industrial Empire

The regulators, led by the central bank, ordered Ant to create a separate financial investment company that would be subject to the kind of capital requirements imposed on banks. That could open a door for major state banks or other types of government-controlled groups to buy into the company to help eat up its capital base, officials and councilors say.

China National Pension Fund, China Development Bank and China International Capital Corp.

, the country ‘s leading property investment bank, is already an investor in Ant.

Mr. Ma, the richest man in China, has helped define China’s new economy with the two companies he founded – Ant and his e-commerce partner Alibaba Group Holding Ltd. Their businesses span payment services, online sales, cloud computing, wealth management and lending. Separately, Alibaba is facing a trust probe that could also review its business and asset movements.

The People’s Bank of China and the State Administration for Market Regulation, which governs Ant and Alibaba, have not responded to requests for comment. Ant declined to comment. Mr. Ma and Alibaba did not respond immediately.

But in targeting Mr Ma, Chinese leaders oppose a tight balancing act, trying to keep similar entrepreneurs going – without hurting the spirit of innovation that has helped empowering China’s technological and economic rise.

“Without question the reason is to consolidate in Ma Yun,” said an adviser to an anti-monopoly committee of the State Council of China, the country’s main government body, using the Chinese name Mr. Ma. “It’s like putting a horse on a hill. ”

It is difficult to overstate the role of Mr Ma ‘s companies in the Chinese economy. Ant and Alibaba together have allowed hundreds of millions of Chinese customers and businesses to make a purchase, invest money, execute an investment or take out a loan with a swipe of the thumb.

Having recently benefited from a relatively light regulatory friction, Mr. Ma’s companies have come to challenge state department leadership in areas such as banking and money management.

But laissez-faire days are over. Authorities in recent months have pledged to strengthen regulation over a growing and influential Internet sector. While a number of other companies are under scrutiny, including WeChat’s popular social media app operator Tencent Holdings Ltd. and riding company Didi Chuxing Technology Co., regulators for now are focusing on Mr. Ma and his companies.

Mr Ma, flashy and outspoken, has long been fighting with regulators, especially those of the People’s Bank of China, who have been monitoring a sprawling empire that they fear is running amok and trying to enforce restrictions.

The tensions came to an end in late October when Mr Ma openly criticized Xi Jinping’s signature risk control campaign, while also suing regulators for stifling innovation – in a speech that occurred just days before Ant, in which he is a controlling shareholder, is ready to go public.

Prior to the speech, Mr. Xi had paid little attention to Ant’s planned IPO, according to someone familiar with the regulatory process. “Thanks to Ma himself, the IPO got on Xi’s radar,” the man said.

Mr Ma’s attack on governors was swiftly repulsed. He called on Mr Xi to personally cancel the public offering, which was expected to be the largest ever and would have cost Ant more than $ 300 billion, and called on regulators look into the dangers posed by Mr Ma’s empire.

Since then, China’s market and financial regulatory bodies have taken action. Officials are particularly concerned about how Ant will use data used by its Alipay payment app to encourage banks to work with the company in lending to consumers and small businesses. Ant funds only a fraction of the loans, with most of the money coming from the banks, leaving them with the credit risks.

But even Mr. Xi, the most powerful leader in recent Chinese history, is facing limitations on how far his government can go down to shrinking Mr. Ma’s empire.

A leader among them avoids the idea that they are dealing a major blow to business at a time when the private sector is seen as losing ground to state-owned companies. Moreover, the leadership is concerned about backlash from international investors at a time when Beijing wants to dispel growing doubts about its commitment to market reforms and encourage more domestic companies like Alibaba that can compete with their American peers.

To allay fears about the takeover of the state, officials said, authorities selected a deputy central bank governor with a reputation for market to detail the actions against Ant this week. this in a public question and answer statement.

Pan Gongsheng, the former deputy governor in charge of selling shares for two of China’s largest state banks before moving to the People’s Bank of China, urged Ant to revive his business based on market and legal principles.

However, Mr Pan stressed the need for the company to “integrate corporate development into a complete national development,” according to comments issued by the central bank on Sunday.

Ant said in a statement Sunday that he would comply with regulatory requirements and develop a plan and schedule for the scheduled review. At a meeting with governors in November, Mr Ma offered the government “to take any platforms Ant has, for as long as the country needs it,” in a seemingly attempt to strengthen his relationship with Save Beijing. Mr Ma has not appeared in public since his October speech.

At the same time, China’s market regulator filed a lawsuit against trusting Alibaba, which owns a third of Ant, for allegations that the company has used its prime market position to pressure buyers to sell. only on their platforms.

Officials are also concerned about the threat Alibaba poses to traditional brick-and-mortar sellers. “We have received many complaints about Alibaba outsourcing smaller competitors and its internet platforms taking away business from others,” said a presiding officer experienced in the investigation.

Wang Fuqiang, who owns a laptop store in Beijing, is among those who have noticed the pin. Mr. Wang’s sales are steadily falling as more people shop on Taobao, an online shopping site owned by Alibaba, and JD.com Inc., Inc.

another major e-commerce player.

“Now, most customers come to my store to try out the laptops and take pictures,” said Mr Wang, who has been running the store for 17 years. “Then they would go away and buy it online. ”

—Bingyan Wang contributed to this article.

Write to Lingling Wei at [email protected]