China urges Ant Group to restructure its operations; new hit on Ma’s empire

By Rahul Vaimal, Associate Editor
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Chinese authorities have asked the world’s largest fintech company, Ant Group Co Ltd to restructure its lending and other consumer finance operations to comply with the regulatory requirements of the country.

China’s central bank has given a new hit to the billionaire founder and controlling shareholder of Ant Group, Jack Ma. Last month the regulators had suspended the fintech giant’s $37 billion initial public offerings in Shanghai and Hong Kong and few days after that the antitrust authorities of the country had initiated an investigation against the eCommerce establishment Alibaba Group, which owns a 33 percent stake in Ant Group.

The regulators and Communist Party officials of China targeted Ma’s sprawling financial empire after he publicly criticized the country’s regulatory system in October for oppressing innovation.

The People’s Bank of China (PBOC) Vice Governor Pan Gongsheng stated that the regulators have ordered Ant to formulate a rectification plan and an implementation timetable of its business, including its credit, insurance and wealth management services.

The regulatory statement said that Ant Group lacked a sound governance mechanism, disobeyed regulatory compliance requirements. It also added that the company used its market position to rule out its competitors and hurt the rights and interests of consumers.

Mr. Pan commented that Ant should establish a separate holding company to ensure capital adequacy and regulatory compliance. The fintech company must be fully licensed to operate its personal credit business and be more transparent about its third-party payment transactions and not engage in unfair competition.

“We appreciate financial regulators’ guidance and help. The rectification is an opportunity for Ant Group to strengthen the foundation for our business to grow with full compliance, and to continue focusing on innovating for social good and serving small businesses,” Ant responded in a statement.

During a meeting conducted with Ant representatives, the regulators raised the issues of the fintech company like its poor corporate governance, defiance of regulatory demands, illegal regulatory arbitrage, the use of its market advantage to oppress its rivals and harming consumers’ legal interests.

Last month, China released draft rules aimed at preventing monopolistic behavior by internet firms such as signing exclusive agreements with merchants and the use of subsidies to squeeze out competitors. The country also warned companies to expect increased scrutiny, as it fined and investigated into mergers involving Alibaba and Tencent Holdings Ltd.

Ant’s beginning traces back to Alipay, a payment service launched in 2004, 33 percent of its share owned by Alibaba. Alipay app dominates digital payments in China, with more than 730 million monthly users. The company was poised to be valued at more than $300 billion in its stock market debut.

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