Thursday, February 2, 2023

Chinese regulators order Ant Group to focus on payments, stop before breach

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Chinese Regulators Ordinance Jack MaAnt Group Co., the titan of online finance, is returning to its roots as a payment service provider, threatening to slow the growth of its most lucrative consumer lending and wealth management businesses.

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. Although it did not directly request 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 soon as possible.

The series of decrees poses a serious threat to the expansion of Ma’s rapidly growing online finance empire from a Pay Paloperation similar to a full range of services over the past 17 years. Before regulators intervened, Ant was ready for a public list it would have earned him 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, Beijing-based analyst at Gavekal Dragonomics. “We haven’t seen any clear indication of a break yet. Ant is a giant player in the world and any breakup should be careful. “

Authorities also criticized Ant for its poor corporate governance, disregard for regulatory requirements and regulatory arbitrage. The central bank said Ant used his dominance to shut out rivals, harming the interests of his hundreds of millions of consumers.

China stepped up its examination of the two pillars of billionaire Ma’s internet domain last week by also opening an investigation into the alleged monopoly practices of the subsidiary Ant. Ali Baba Group Holding Ltd. US-listed shares of e-commerce company tumbled down most ever on the news of the probe.

The State Administration for Market Regulation dispatched investigators to Alibaba on Thursday and the on-site investigation ended the same day, according to a Saturday.reportposted on a news app operated by the Zhejiang Daily. The report quotes an anonymous official from the local market regulation watchdog in Zhejiang province, where Alibaba is based.

Ant said in a statement on Sunday that he would set up a task force to create proposals and a review schedule. It will maintain business operations for users, committing to keep costs for consumers and financial partners unchanged, while strengthening risk control.

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, Tencent Holdings Company chairman “Pony” Ma Huateng and other tycoons are now under surveillance after gathering hundreds of millions of users and gaining influence in nearly 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 $ 35 billion start with Ant.

Alibaba CEO Daniel Zhang said in a meeting with local regulators on Friday that the company would only prosper in the future by complying with the rules, the China News Service said.reported.

Ant’s senior leaders are part of a working group that already has almost daily interactions with watchdogs. 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 whether to carve out its different lines of operation, to split its online and offline services, or to follow a completely different path.

Ant backers include Warburg Pincus LLC, Carlyle Group Inc., Silver Lake Management LLC, Temasek Holdings Pte and GIC Pte.

Read more: Jack Ma is silent after spectacular defeat of Ant Group

“Ant’s growth potential will be capped by focusing on its payments services,” said Shujin Chen, head of China financial research in Hong Kong. Jefferies Financial Group Inc. “On the continent, the online payments industry is saturated and Ant’s market share has almost reached its limit.”

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