Jack Ma makes Ant Ant for Chinese Governors Placate

The unprecedented offer, mea culpa of sorts from Mr Ma revealed how he found himself face to face with officials from China’s central bank and securities, banking and insurance watchdogs. The November 2 meeting was held just days before Ant was due to go public, in the world’s largest public offering.

Mr Ma had angered Beijing by easing out in a speech in October at President Xi Jinping’s signature campaign to control financial risks, saying he had blocked innovation. Now, the regulators had called the meeting to express their concerns about Ant’s business model.

His fingerprint bid at the meeting failed to save the IPO and since then Beijing has stepped up efforts to bring back the Big Tech giants in China.

“Ant Group cannot confirm the details of the meeting with regulators held on November 2, 2020, as it is confidential,” a company spokesman said.

Stopping the sale of Ant shares of more than $ 34 billion that followed the Nov. 1 meeting was just the beginning. 2. This was followed by a blockade of actions against what is referred to as the “platform economy,” or internet-based businesses promoted by large technical companies.

Mr Xi personally ordered Chinese regulators to investigate the dangers posed by Ant, according to Chinese officials with knowledge of the case, and shut down Ant’s IPO.

People close to China’s financial regulators say there is no decision, for now, to uphold Mr Ma on his offer. One plan under consideration involves placing Ant under stricter capital and capital rules, depending on the population. Under that scenario, state banks or other types of state investors would buy into Ant to help cover any potential capital shortfall as a result of the strict regulations.

“The Chinese state has already built some of the financial infrastructure built by Ant nationally, such as the interbank payment system that became NetsUnion,” said Martin Chorzempa, a researcher at the Institute of Economics. Peterson International which specializes in China’s fintech division, referring to the company now controlled by the central bank that clears transactions between banks and third-party payment providers. “So there is a precedent for national platforms that are seen as a vital policy issue.”

The government led by Mr Xi in recent years has shown a determination to bring private gatherings to a standstill that is seen as uncontrollable – no matter how political it may have appeared.

For example, Dalian Wanda Group tycoon Wang Jianlin has been able to sell assets, reduce business and repay bank loans. Anbang Insurance Group, another private high roller, was taken over by the state, while in 2018 founder Wu Xiaohui was sentenced to 18 years in prison for fraud and indecency. In addition, HNA Group, an airline and hotel conglomerate, was forced to withdraw from aggressive overseas property and sell assets.

Until recently, Mr Ma also had a reputation for well-cultivated political ties. He made no public appearances from his speech on October 24th.

For years, companies included Ant and e-commerce giant Alibaba Group Holding Limited.

BABA -1.68%

, both under Mr Ma ‘s control, and internet conglomerate Tencent Holdings have been largely monitoring the government’ s efforts to build and leverage payment, lending and other internet – based businesses. expansion.

With Tencent’s WeChat and other apps developed by these companies, millions of Chinese customers and small business owners can make a purchase, pull a taxi, activate an investment or even get a swipe loan on their smartphones aca. Companies such as Alibaba and Tencent have become so successful that Chinese leaders regularly introduce Premier Li Keqiang’s use of the internet and big data is so crucial in driving future economic growth. .

However, Beijing’s leadership has also been increasingly dissatisfied with the wealth and impact these companies have built in addition to the risks posed by their light regulatory activities, such as borrowing on favorite of Mr. Ma’s Ant. Moreover, the big tech companies have in some cases used the government’s own problem to use data and technology to tighten social control.

In November, China released draft rules aimed at preventing these companies from sharing to share sensitive consumer data, creating agreements to eliminate smaller competitors and engaging in other incompetent behaviors. Earlier this month, a meeting with Mr Xi of Polburo of the Communist Party promised to strengthen antimonopoly efforts next year and “prevent the disorderly expansion of capital” – a message seen as a result greater breakdown of internet giants.

Chinese officials say the leadership is particularly concerned that high-profile entrepreneurs like Mr. Ma will continue to attract capital while exposing the financial system to increased risks.

Even before Ant’s IPO stopped, for example, regulators were already concerned about the controversy surrounding the deal. The sale of the stock would have valued the company at more than the likes of JPMorgan Chase & Co. and Goldman Sachs Group.

Shortly after the Politburo meeting, China’s trust regulator fined Alibaba and Tencent’s subsidiary for some of what they found years ago – again marking the laissez-faire days.

The trend is parallel to other parts of the world. The U.S., for example, is suspending its antitrust reviews on Facebook Inc.

and the Alphabet Inc.’s

Google to find out if they used their dominance on social media and online research and advertising, respectively, in the internet economy.

In the case of China, however, state-owned enterprises span telecommunications, financial services, airlines, energy and other sectors of the country. Emphasizing “antimonopoly” now, Mr. Xi is squarely targeting Chinese internet giants that have exploited unprecedented data on millions of Chinese customers and businesses.

Alibaba and Tencent have sometimes heeded requests from law enforcement and other authorities to access consumer data, but have so far stood firm in sharing data oaths that the government could help in other ways, such as building a consumer credit scoring system similar to FICO used in the US

The country’s central bank and traditional lenders do not have a direct line to younger customers in China like Ant. The company’s Alipay app is used by billions of Chinese, which allowed it to collect collections of user data and use proprietary algorithms to assess the creditworthiness of individuals. But so far his data has not been fully integrated into the central bank’s credit write-off system, and such information gaps positioned Ant as a valuable partner to start microloans for banks, to especially smaller ones. As a reward, Ant kissed handsome profits.

For now, regulators are debating whether Alipay or any other parts of Ant’s business represent monopolistic competition and if so, what actions should be taken against the company.

“The nationality of at least parts of the company is not zero,” said a government adviser in Beijing.

– Jing Yang contributed to this article.

Write to Lingling Wei at [email protected]