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A fine on Ant could help pave the way for the company to secure a long-awaited financial holding company license, seek growth again, and eventually revive its plans for a public market debut
Published : 23 Nov 2022, 07:59 AM
Chinese authorities are poised to impose afineof more than $1 billion on Jack Ma'sAntGroup, said sixsourceswith direct knowledge of the matter,setting the stage forending the fintech company's two-year long regulatoryoverhaul.
The People's Bank ofChina(PBOC), which has been driving therevampatAntafter the Chinese firm's $37 billion IPO was scuttled at the last minute in 2020, is the regulator that is readying thefine, said five of thesources.
The central bank has been in informal communication withAntabout thefineoverthe past few months, said three of thesources. It plans to hold more discussions with other regulators aboutAnt'srevamplater this year and announce thefineas soon as the second quarter of next year, said a source.
AfineonAntcould help pave the way for the company to secure a long-awaited financial holding company license, seek growth again, and eventually revive its plans for a public market debut.
Ant'sfinewould be the largest regulatory penalty imposed on a Chinese internet company since ride-hailing major Didi Global wasfined $1.2 billionbyChina's cybersecurity regulator in July.
The fintech firm's affiliate, e-commerce titan AlibabaGroup9988.HK, last yearreceived a recordfineof 18 billion yuan ($2.51 billion) forantitrust violations.
US-listed shares of Alibabaslipped 1.2% in morning trading.
The penalties are part of Beijing's sweeping crackdown on the country's tech behemoths that has sliced hundreds of billions of dollars off their values and shrunk revenues and profits.
But Chinese authorities have in recent months softened their tone on the tech crackdown amid efforts to bolster an economy that has been hurt by the COVID-19 pandemic.
Afinewill likely focus onAnt's alleged violations relating to a "disorderly expansion of capital" and the corresponding financial risks its once freewheeling businesses have caused, said one of thesources.
Antand the PBOC did not respond to requests for comment.
All thesourcesspoke on the condition of anonymity as they were not authorised to speak to the media.
BUSINESSOVERHAUL
Chinese authorities abruptly pulled the plug onAnt's IPO, which wassetto be the world's biggest, in November 2020 soon after billionaire founder Mapublicly criticisedChina's regulatory system for stifling innovation.
In the months since then, regulatorssetabout reining in Ma's empire, starting with theantitrust probe into Alibaba. Ma, one ofChina's most successful and influential businessmen, has largely remained out of public view since the crackdown.
The regulators also pushedAnt, whose businesses span payment processing, consumer lending and insurance products distribution, torevampits business structure and bring it under tighter regulatory supervision.
Anthas been formally undergoing a sweeping businessoverhaul since April last year which includes turning itself into a financial holding firm, subject to rules and capital requirements similar to those for banks.
Theoverhaul includes foldingAnt's two lucrative micro-loan businesses into a consumer finance unit and sharing its treasure trove of data on more than 1 billion users with state firms, a move expected to curb its profitability and valuation by curtailing some of its businesses.
The penalty onAnt, however, is unlikely to be finalised tillChinaappoints a number of top officials at the State Council and other government bodies next year, said four of thesources.
WhileChina's ruling Communist Party wrapped up its twice-a-decade congress and central leadership reshuffle last month, top posts at the cabinet and government bodies are still subject to changes, which typically take place at the annual meeting of parliament in early March.
The central bank's chief, Yi Gang, 64, is likely tostep downas henearsthe official retirement age of 65 for minister-level officials.
China's State Council Information Office, which handles media queries for the cabinet, did not respond to a request for comment.
Just beforeAnt's IPO dust-up, the central bank officially issued rules to regulate the country's vast and often complex financial holdings companies, as part of its efforts to rein in systemic financial risks.
It has so far approved the establishment of three such firms includingChinaCITIC Financial Holdings.
The central bank's local branch in the eastern city of Hangzhou, home toAnt's headquarters, received the firm's application tosetup a financial holding company in June, two of the sixsourcesand a separate person said.
The PBOC, however, is unlikely to formally disclose the application tillAntwraps up itsrevamp, added thesources.
Fines of leading tech companies inChina, in billions of US
