Sunday, September 24, 2023

Suppression of ants strengthens the power of China’s main banking regulator

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China’s crackdown on Jack Ma’s Ant Group has amplified the power of Guo Shuqing, China’s top banking regulator, who has led the charge against the fintech group since Beijing suspended its initial $ 37 billion public offering in November.

The growing stature of Mr. Guo, chairman of China’s Banking and Insurance Regulatory Commission, has also put pressure on the market watchdog who approved the IPO, according to government officials and advisers.

Last month, the People’s Bank of China tightened its grip on Ant, issuing new draft rules which could force the dismantling of the company’s online payment arm for antitrust reasons. The measures were announced hours after Mr. Ma appeared in a video uploaded – his first public appearance in almost three months.

Supporters of Ant at the China Securities Regulatory Commission have been criticized for allowing the group to dai bing shang shi, or “make the list despite the illness”. The phrase refers to the regulatory risks associated with the fintech business model that allowed Ant to evade the stricter regulatory scrutiny applied to state-dominated banks.

Officials said Guo was instrumental in rolling out the new measures, which were endorsed by long-suspicious Chinese president Xi Jinping. private sector tycoons as a threat to the Communist Party’s grip on power.

“[Ant] wanted to impose its agenda on the government, and not the other way around, ”said a former PBoC official who dealt with the fintech group.

Ant and the central bank have previously clashed over issues ranging from the popularity of the group’s flagship Yu’E Bao Money market funds, which was once the largest in the world, to its willingness to share the vast mine of credit data it had collected on businesses and individuals.

“President Xi wanted the industry to be regulated,” a central bank adviser said. “Guo helped put the leader’s thoughts into practice.”

The adviser added that the crackdown on Ant had solidified Mr. Guo’s status as China’s second most powerful financial official after the vice premier. Liu He, one of Xi’s most trusted lieutenants, whose job it was to manage the US trade war under the Trump administration. “Xi, Liu and Guo share the belief that the weaknesses of the market economy can be corrected by strict regulation,” the adviser said.

Mr. Guo aspires to succeed Mr. Liu, according to a former PBoC official and two central bank advisers. He has headed the banking regulator since 2017, is vice-governor of the PBoC under Yi Gang, the governor of the central bank, and heads the Communist Party committee of the PBoC.

He previously ran one of China’s largest state-owned banks, the China Construction Bank, as well as the market regulator and – unusual for a financial technocrat – was governor of Shandong, a large industrial province.

Since returning to the financial arena, Mr. Guo has overseen a “regulatory storm” that has dampened the shadow banking sector, a priority for Liu, whose broad portfolio also includes US-EU trade negotiations and SOE reform.

“Liu He is so powerful,” Chen Long told Plenum, a Beijing-based consulting firm. “I don’t think one person will inherit all of their wallets.”

Mr. Guo has long been a skeptic of China’s internet finance revolution. After joining the CBIRC, he led a crackdown on the peer-to-peer lending sector, which virtually disappeared as a result.

At a press conference in 2017, Mr. Guo said he had never used a fintech product.

According to Ant’s prospectus, its Alipay payment app is regularly used by 700 million people and 80 million merchants in China. “They are useful for the real economy,” Guo said, referring to fintech innovations such as Alipay and Yu’E Bao. “But we must avoid their risks.”

Regulators would not let fintech companies grow “too big to fail” or “hamper fair competition and strive for excessive profits,” he warned in a speech in December.

CSRC, however, approved the listing of Ant on the Shanghai Star Market less than two months after receiving the company’s IPO application. That compared to expectations of more than seven months for other listings on the tech-focused board.

People familiar with the matter have said the equities regulator wants to speed up approval of Ant’s IPO because the listing would be a symbol of its succeed in attracting The IPOs of Chinese tech groups, which have traditionally looked to overseas markets or Hong Kong for funding.

“It is part of the CSRC’s mandate to expand China’s influence in global financial markets,” said Andrew Collier, Managing Director of Orient Capital Research. “It’s a very different mandate from CBIRC or PBoC.”

The CSRC and CBIRC did not respond to a request for comment.


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