As part of a restructuring roadmap that Chinese financial regulators presented this week, financial technology giant Ant Group Co. is reportedly returning to its roots as an online payment provider similar to PayPal Holdings Inc., while its more profitable investing and lending activities would be reduced. .
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Regulators, led by the central bank, also ordered Ant to form a separate financial holding company that would be subject to the type of capital requirements applied to banks. This could open the door for large state-owned banks or other types of government-controlled entities to buy the company to help strengthen its capital base, officials and advisers say.
China’s national pension fund, China Development Bank and China International Capital Corp., the country’s leading public investment bank, are already investors in Ant.
Mr. Ma, China’s richest person, helped define China’s new economy with the two companies he founded – Ant and its e-commerce subsidiary Alibaba Group Holding Ltd. Their businesses cover payment services, online retail, cloud computing, wealth management and lending. In addition, Alibaba is facing an antitrust investigation that could also lead to an overhaul of its activities and asset divestments.
The People’s Bank of China and the State Administration for Market Regulation, which regulate Ant and Alibaba, did not respond to requests for comment. Ant declined to comment. Mr. Ma and Alibaba did not immediately respond.
But in targeting Mr. Ma, China’s executives face a difficult balancing act, trying to keep entrepreneurs like him in check – without undermining the spirit of innovation that has helped fuel the technological and economic boom. from China.
“There is no doubt that the goal is to contain Ma Yun,” said an adviser from the anti-monopoly committee of the Chinese State Council, the country’s highest government body, using Mr. Ma’s Chinese name. “It’s like putting a bridle on a horse.”
It’s hard to overestimate the role Mr. Ma’s businesses have played in the Chinese economy. Ant and Alibaba have enabled hundreds of millions of Chinese consumers and businesses to make a purchase, deposit money, execute an investment, or take out a loan with just a push.
Until recently, having benefited from a relatively light regulatory touch, Mr. Ma’s companies have come to challenge the dominance of the public sector in areas such as banking and financial management.
But the time for laissez-faire is over. The authorities have pledged in recent months to tighten regulations on an Internet sector whose size and impact are increasing. While some other companies are also under scrutiny, including the popular operator of the WeChat social media app Tencent Holdings Ltd. and ride-sharing company Didi Chuxing Technology Co., regulators are currently focusing their attention on Mr. Ma and his companies.
The flashy and outspoken Mr. Ma has long been at odds with regulators, especially those at the People’s Bank of China, who have been wary of a sprawling empire they fear going mad about and have tried to impose restrictions.
Tension peaked at the end of October when Ma openly criticized leader Xi Jinping’s risk control initiative, while criticizing regulators for stifling innovation – in a speech that came just days before Ant , of which he is the majority shareholder. , had to be made public.
Prior to the speech, Xi had paid little attention to Ant’s planned IPO, according to a person familiar with the regulatory process. “Thanks to Ma himself, the IPO fell on Xi’s radar,” the person said.
Mr. Ma’s attack on regulators quickly backfired. This led Xi to personally cancel the initial public offering, which was to be the largest ever and would have valued Ant at over $ 300 billion, and ask regulators to look into the risks posed by the empire. by M. Ma.
Since then, Chinese market and financial regulatory agencies have taken action. Officials are particularly concerned about how Ant is using data exploited by its Alipay payments app to encourage banks to work with the company to provide loans to consumers and small businesses. Ant finances only a fraction of the loans, most of the funds coming from the banks, leaving them with credit risk.
But even Mr. Xi, the most powerful leader in China’s recent history, faces constraints on how far his government can go to suppress Mr. Ma’s empire.
The main one is to avoid the perception that this is a serious blow to entrepreneurship at a time when the private sector is losing ground to public enterprises. In addition, executives are concerned about the reaction of international investors at a time when Beijing wants to dispel growing doubts about its commitment to market reforms and to nurture more local companies like Alibaba that can compete with their US counterparts. .
To allay fears of excessive state action, officials said, authorities have chosen a deputy central bank governor with a pro-market reputation to detail actions against Ant this week in a questions statement. responses published.
Pan Gongsheng, the deputy governor who previously oversaw sales of shares in two of China’s largest state-owned banks before moving to the People’s Bank of China, urged Ant to review its operations on the basis of legal and market principles. .
Still, Mr. Pan stressed the need for the company “to integrate the development of the company into the overall national development,” according to statements released by the central bank on Sunday.
Ant said in a statement on Sunday that he would comply with regulatory requirements and develop a plan and timetable for the orderly review. In a November meeting with regulators, Ma proposed that the government “take whatever platforms Ant has, as long as the country needs them,” in an apparent effort to salvage its relationship with Beijing. . Mr. Ma has not appeared in public since his October speech.
Meanwhile, the Chinese market regulator last week launched an antitrust investigation into Alibaba, which owns a third of Ant, over allegations the company used its dominant market position to pressure traders to ‘they only sell on its platforms.
Officials are also concerned about Alibaba’s threat to traditional retailers. “We have received numerous complaints about Alibaba ousting smaller rivals and its internet platforms that take business away from others,” said a regulator familiar with the investigation.
Wang Fuqiang, who owns a laptop store in Beijing, is among those who have felt the pinch. Mr. Wang’s store has seen sales drop steadily as more people shop on Taobao, an online shopping site owned by Alibaba, and JD.com Inc., another big e-commerce player.
“Now most of the shoppers come to my store to try out laptops and take pictures,” said Mr. Wang, who has run the store for 17 years. “Then they would go and buy it online.”
This story was posted from an agency feed with no text editing.