China orders Ant to return to roots in payments services
Chinese regulators have ordered Jack Ma’s online financial titan Ant Group Co. to return to its roots as a payment service provider, threatening to slow the growth of its most lucrative consumer lending business and wealth management.
The central bank summoned Ant executives over the weekend and told them to “rectify” the company’s lending, insurance and wealth management services, the People’s Bank of China said in a statement on Sunday. While refraining from directly requesting the dissolution of the company, the central bank stressed that Ant should “understand the need to overhaul its business” and come up with a timetable as quickly as possible.
The series of executive orders poses a serious threat to the expansion of Ma’s online finance empire, which has grown rapidly from a PayPal-like operation to a full range of services over the past 17 years. Before regulators stepped in, Ant was on the verge of going public that would have valued him at over $300 billion. The Hangzhou-based company must now move forward with establishing a separate financial holding company to ensure it has sufficient capital and protect private personal data, the central bank said.
“This is the culmination of a series of regulations and sets the direction for Ant’s business,” said Zhang Xiaoxi, analyst at Beijing-based Gavekal Dragonomics. We have yet to see a clear indication of a breakup. Ant is a giant player in the world and any breakup should be careful. “
Authorities have also criticized Ant for its poor corporate governance, disregard for regulatory requirements and regulatory arbitrage. The central bank said Ant used his dominance to exclude rivals, harming the interests of his hundreds of millions of consumers.
Last week, China stepped up its scrutiny of the two pillars of billionaire Ma’s internet business when it also launched an investigation into alleged monopoly practices by the subsidiary of Ant Alibaba Group Holding Ltd. investigation.
The State Administration for Market Regulation dispatched investigators to Alibaba on Thursday and the on-site investigation was completed the same day, according to a report on a Zhejiang Daily news app on Saturday. The report cites an anonymous official with the local market regulation watchdog in Zhejiang province, where Alibaba is based.
The pressure on Ma is at the heart of a larger effort to curb an increasingly influential internet sphere.
Once hailed as engines of economic prosperity and symbols of the country’s technological prowess, the empires built by Ma, the chairman of Tencent Holdings Ltd., “Pony” Ma Huateng, and other tycoons are now under surveillance after amassing hundreds of millions of users and gain influence in almost every aspect of daily life in China.
Ma’s own empire is in crisis mode. In early December, with Ant under regulatory control, the man most closely identified with China Inc.’s meteoric rise was advised by the government to stay in the country, a person familiar with the matter said. Alibaba has lost more than $200 billion in market value since November, when regulators torpedoed what would have been a record-breaking start of $35 billion with Ant.
Its leaders are part of a working group that already has almost daily interactions with guard dogs. Meanwhile, regulators, including the China Banking and Insurance Regulatory Commission, are assessing which companies Ant should give up control to contain the risks it poses to the economy, officials with knowledge of the matter said. . They have not yet commented on the advisability of dividing up its various lines of operation, of splitting up its online and offline services or of following a totally different path.
Ant’s growth potential will be capped by focusing on its payments services, said Shujin Chen, head of China financial research at Hong Kong-based Jefferies Financial Group Inc.. On the continent, the online payments industry is saturated and Ant’s market share has almost reached its limit. “
By Bloomberg News
