SHANGHAI – Ant Group is reorganizing many of its operations under the umbrella of a financial investment company for transparency at the behest of Chinese regulators, a source with knowledge of the situation told Nikkei.
Alibaba Group’s intermediary loan business and the sale of cash and insurance to each other would become subsidiaries of the holding company, with Ant as its parent. The restructuring would also cover MYbank, an online lender for small and midsize companies, and possibly Tianhong Asset Management, a money market fund operator Yu’ebao.
Authorities have demanded that “all businesses that require a financial license go under the property company,” the source said. Whether this includes Alipay – the mobile payments platform with more than 1 billion users – is still up in the air.
Ant maintains the structure of the property company “that is not required under current rules” but has stated that he would follow such a request from authorities.
Alipay, with its large number of customers and huge number of services, could be very strong against the digital yuan that the Chinese government is pushing. Beijing may be tightening their scrutiny of Ant to close the competitive gap.
At the same time, regulators are moving strongly to reverse financial risks. Their targets include Xiang Hu Bao, a mutual support platform from Ant that is primarily aimed at small businesses and self-employed workers that form the basis of Alibaba’s e-commerce service.
The platform offers basic health insurance covering conditions such as cancer and myocardial infarction, with benefits paid for jointly by all participants. It has attracted around 100 million members since its launch in October 2018.
Authorities are concerned about its ability to make future payments reliably. The source told Nikkei that Ant has explained that, as money has not been collected, they are not in danger of being taken away or misused. But they are still considering splitting the business, perhaps out of concern that the service would be significantly more efficient if authorities want to keep capital matters on a par with conventional insurers. .
China is pushing for a digital yuan and Ant – with its large customer base – appears to be a competitor. © Reuters
Also under fire is Ant’s intermediary loan business, a source of profit even greater than its payment services. The company connects Alipay customers with banks that can meet their financing needs, and collects taxes in trade.
Regulators say the fees are too high, as they feel Ant could take up to 30% interest income from loans he helped source. Regional banks that want to increase their lending significantly through Ant, but end up making very few of these loans after cutting the middle, set the high for future financial risks.
Ant has more than 2 trillion yuan ($ 310 billion) in outstanding credit balance through its smartphone platform.
Authorities are also concerned about the costs to consumers. Ant has promised regulators it will not increase costs to customers for its service, the source said who spoke to Nikkei. It has already taken steps such as cutting credit limits for younger lenders.
Regulators are pushing not only Ant, but finance companies in general, to maintain sufficient capital buffers.
These trends will put huge teeth in the company’s profits. The source said there is still no clear timeline for Ant’s first planned public offering, which was slated for November last year before being suspended at last-minute concerns. governance.
As soon as Ant goes public, it is expected to raise less than the $ 35 billion originally expected. But the source denied reports that the company has stepped back from a start-up investment, saying it has not received such a request from authorities.
Beijing seems to be cracking down on both Ant and Alibaba, with which it is linked. Jack Ma, founder of Alibaba and controlling shareholder Ant, has humiliated many regulators with his vague criticism of China ‘s financial system.
Authorities have launched an anti-monopoly investigation into Alibaba, and Ant activists were summoned for hearings at the People’s Bank of China around the same time.
A statement released after the December Central Economic Work Conference, a major economic planning meeting, said “efforts will be made to strengthen anti-monopoly guidance and prevent disorderly capital expansion. ” This may have precluded a more rigorous scrutiny of Ant, which controls more than half of the mobile payments market.
Despite all this, Ma himself has disappeared from the public eye, embracing a contemplation of speculation.
Jack Ma, founder of Alibaba and controlling shareholder Ant, has been out of the public eye over the past two months. © Reuters
Ma had his last public appearance at the end of October, when he gave a speech in Shanghai. Privately, he was last seen in early December, singing a popular Chinese song at a Hangzhou bar with part of Ma and Alibaba’s action group.
“Maybe he wanted to show he was alive and well,” a former company source said. Ma has not been seen since.