Ant Group Announces Overhaul as China Tightens Its Grip


China’s fast-moving marketing campaign to curb the facility of web giants has hit its newest mark: Ant Group, the fintech sister firm of the e-commerce behemoth Alibaba.

Ant introduced on Monday that it will undertake a sweeping, government-ordered overhaul of its enterprise to allay regulators’ considerations about the way in which it competes with rivals, its large-scale assortment of person information and the dangers its enterprise might pose to the broader monetary system.

Beijing has made the company empire of Jack Ma, Alibaba’s billionaire co-founder and Ant’s controlling shareholder, an early main goal as it dials up its scrutiny of Big Tech. Chinese officers pressured Ant to name off its blockbuster preliminary public providing final November, mere days earlier than its shares had been anticipated to debut. On Saturday, China’s antitrust authority fined Alibaba $2.eight billion for abusing its dominance in digital retail — a report penalty for violations of the nation’s antimonopoly regulation.

Ant’s flagship Alipay app has change into an indispensable instrument for greater than 700 million month-to-month customers in China, serving to them pay for lunch, stash away financial savings and store on credit score. But Alipay’s dimension and affect put Ant on the middle of a swirl of considerations for Beijing, together with the facility of leviathan internet platforms, the function of web expertise in finance and the affect of moguls like Mr. Ma when China’s chief, Xi Jinping, is looking for higher state management over the economic system.

As a part of what each Ant and Chinese officers referred to as a “rectification plan,” the corporate mentioned on Monday that it will apply to change into a monetary holding firm, which might convey nearer supervision and necessities that it maintain on to more cash that it’d in any other case lend or put to worthwhile use.

Ant mentioned it will additionally “return to its payment origins.” Alipay began out almost 20 years in the past as a cost service for Alibaba’s purchasing platforms. But as Ant has come to supply different monetary providers inside Alipay, the app has change into a serious car in China for shopper credit score and small-business loans.

The firm additionally mentioned it will strengthen safety protections for the private data it collected to forestall abuse.

“Under the guidance of financial regulators, Ant Group will spare no effort in implementing the rectification plan,” the corporate said in a statement. “Using the rectification as an opportunity, Ant Group will reinforce our commitment to serve consumers, small businesses and the real economy.”

Ant has tangled with Chinese regulators for years as its operations have grown. Officials restricted the company’s expansion in certain areas and beefed up supervision. The fact that Ant could even prepare for an I.P.O. last year was taken, at the time, as a sign of a détente.

Now, the authorities’ more forceful hand in the company’s future could dampen Ant’s appeal to investors if it tried to go public again.

Andrew Collier, the founder and managing director of Orient Capital Research, said the new regulatory framework for Ant could prove more damaging to its bottom line than the antitrust fine would be to Alibaba’s.

Much will depend, Mr. Collier said, on how the restructuring plan is put in place. “The devil is in the details,” he said.

China has only recently joined the United States and European Union in looking for ways to rein in internet giants. Regulators in all three places now share roughly similar concerns about unfair competition, the collection and storage of data, and tech companies’ influence over large segments of national economies.

Ant and other companies, including Tencent, operator of the popular WeChat messaging app and payment platform, have helped bring China to the global forefront of digital finance. But they have also weakened the influence that government-owned banks and other institutions long enjoyed in shaping capital flows.

Mr. Ma, China’s most famous tycoon, saw Alipay’s growth in precisely those terms. And he was not shy about saying as much. He railed for years against big Chinese banks for not lending enough to small businesses. His championing of small enterprises and ordinary consumers is what gave Ant its name.

But when Mr. Ma spoke out once again in October about the backwardness of Chinese financial regulators — this time, as Ant was in the final stages of readying its mega I.P.O. — he appeared to have pushed the government’s willingness to be criticized too far.

“There is no risk-free innovation in this world,” he said, accusing the authorities of being overly focused on containing risk. He said big banks had a “pawnshop mentality,” lending only to those who could put up collateral and failing to modernize using technology.

Not long after, Ant’s share listings were suspended. In December, regulators ordered the company to correct what they called a litany of failings in its business.

The revamp was unveiled on Monday, soon after financial regulators met with Ant representatives, according to a statement from the country’s central bank.

At the meeting, the regulators told Ant to more clearly separate its credit products from its payment tools, the statement said. They demanded that Ant reduce the size of Yu’ebao, the company’s easy-to-use saving service, which was so popular that at one point it dwarfed all other similar funds anywhere on the planet. The officials also ordered Ant to better ensure that the investment funds it offered to users would not easily run out of cash.

Beijing had been telegraphing aspects of Ant’s restructuring for months. Chinese officials first said in September that companies owning two or more financial businesses would have to register as financial holding companies and be subject to increased government oversight. In a news briefing at the time, a central bank official named Ant as one of several companies that were likely to have to restructure under the new rules.

The aim, officials said, was to better monitor systemic risks that had arisen as more nonfinancial companies had “blindly” entered the financial industry.

As Ant accepted its overhaul on Monday, China carefully coordinated its message to stress that the government still supported the growth of large internet platforms.



Source link Nytimes.com

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