It has been 16 months since the $35 billion IPO of financial technology giant Ant Group was postponed in both Shanghai and Hong Kong (China). The fintech then underwent several restructurings, forcing itself to become a joint stock financial company and subject to the same capital regulations as banks. Ant Group at that time was really a “good citizen”, even boring.
So, it’s surprising that Jack Ma’s financial empire is once again gripped by China. Many state-owned banks and companies are required to check the level of financial risk as well as their own connections, especially with Ant Group in the latest tightening of supervision by mainland authorities.
Could this be just a simple test?
According to Bloomberg, this is part of a high-level anti-corruption campaign in China’s financial sector since October last year. The Central Commission for Discipline Inspection of this country conducted an inspection to reform 25 financial institutions, including many regulatory agencies, policy banks, state-owned banks, credit institutions and companies. insurance. Ant has done a lot of dealings with state-owned banks in consumer lending, so it is understandable that the government requires organizations to report links to Ant.
However, many believe that there is actually another reason behind the government’s move. This month, China arrested the former party chief of Hangzhou – where Ant is headquartered – on suspicion of taking bribes. Several fintech companies are believed to be involved.
This anti-corruption campaign has become the largest-scale investigation since 2016. Last September, China’s Central Commission for Discipline Inspection for the first time issued a detailed set of guidelines for 101. crimes, including bribery, neglect of duty, insider trading, or the ratification of questionable commercial papers.
The punishment is very severe. Mr. Hu Huaibang, former President at China Development Bank was sentenced to life in prison for bribery and granted a $4.8 billion line of credit to CEFC China Energy even though the company was in front of the company at that time. risk of default. Mr. Lai Xiaomin, former chairman of China Huarong Asset Management, was also executed for accepting bribes of 1.8 billion yuan ($280 million).
Alibaba and many other technology companies are “pinned by the Chinese government”
Chinese President Xi Jinping is said to be about to “lose patience with the banking system”. Any impure credit and investment activities that follow can cause billions of dollars in damage and put bureaucrats in jail for years.
Some have also suggested that China canceled Ant’s IPO in part because it was unhappy with the company’s complicated ownership structure. Reports consistently show that Ant has a lot of private equity funds that are little known.
Besides, the Chinese government’s clampdown on Ant is also said to come from the goal of “common prosperity” – that is, assets are distributed moderately for everyone instead of just focusing on groups. rich.
However, regardless of the cause, Ant and Alibaba – Jack Ma’s “pet” are still the most affected corporations. Even, Bloomberg Intelligence forecast that the government’s grip could make Ant “evaporate” two-thirds of its market capitalization.
Most recently, Alibaba – the owner of more than 30% of Ant shares has announced disappointing fourth quarter 2021 business results. The group’s revenue growth is currently at its lowest level since its initial listing in 2014.
Once growing very quickly, even dominating the Chinese e-commerce market, Alibaba has had to go through a turbulent year: both facing stiff competition from rivals, and struggling with regulatory oversight. closely watched by the Beijing authorities. This company in April 2021 was fined a record nearly 3 billion USD for allegedly “abusing a dominant position” to monopolize business activities.
Alibaba CEO Daniel Zhang said the fintech will be forced to “take a step back” to take “many steps forward” in the current context.
“We believe that we have basically attracted all the purchasing power consumers in China. We will shift our focus, from attracting new users, to retaining old ones“, said Mr. Zhang.
According to: Bloomberg