China’s central bank has ordered Jack Ma, one of the countries richest people and co-founder of Alibaba, a multinational technology company, to reign in his fintech empire with a major shake-up and scale back of the Ant Groups operations.
At the end of December, Central bank officials met with executives from Ant Group, Chinas largest payments provider with over 730 million users monthly on its digital payments service Alipay. The company was ordered to “rectify” its lending, insurance and wealth management services, as well as scale back its operations as it was urged by Central Bank officials to return to its origins as a payments company.
This move is one in a series involving the Ant Group, with Chinese regulators putting a halt to its stock market debut back in November, less than 48 hours before it was due. The listings in Hong Kong and Shanghai would have been the biggest stock market entrance to date as the company was set to sell shares with around £26.5bn.
The authorities behind the halt cited “major issues” as the reason behind the suspension. However, some analysts believe that this was an attempt to humble a powerful company, as well as reign in its outspoken leader Ma, who is thought to have offended the Chinese Government after a speech where he called the country’s banking sector “pawn shops”.
An investigation was also launched on Christmas eve by Beijing authorities to look into allegations of “monopolistic practices” by Ma’s e-commerce platform Alibaba.
Some see this continuous action against Ant as a move against the outspoken Ma by China, however, analysts have noted that the reformation of the financial sector is a long-standing policy goal of the government, and it’s likely for other companies to also have to answer to regulators.
Michael Norris, research and Strategy lead at Agency China said to the BBC: “Ant Financial is the first cab off the rank when it comes to these new requirements and an increased level of scrutiny.
“While the talk about palace intrigue between Jack Ma and his various detractors is titillating, it does ignore that policy environment where slowing up the build-up of risk is clear and resolute as a priority.”
Some observers and analysts also think that the scrutiny surrounding Ant Group was centred around the desire to protect the Chinese consumer, as well as politics in China. However, there is a concern as to what affects this may have on the fintech community, and whether Ant is merely the first to be scrutinised.
“Initially I kind of believed the line that the (People’s Bank of China) was trying to protect the consumer,” said Andrew Collier, managing director Orient Capital Research, in an interview with CNBC. “Now, since they’re getting so serious and they’re coming up with new allegations and telling them to reduce large areas of their business, it’s clear it’s partly a political aim at reducing the size of these companies so they don’t have a significant market share and threaten the existence of the state system.
“It’s not good for the future of fintech or the future of the Chinese economy.”
