Chinese Regulators Summon Ant Leaders Ahead of Gigantic IPO

(WSJ) China’s central bank and its securities, banking and foreign-exchange regulators met with billionaire Jack Ma and the top two executives of Ant Group Co. on Monday, just days before the financial technology giant’s stock is set to begin trading publicly.

The People’s Bank of China, the China Banking and Insurance Regulatory Commission, the China Securities Regulatory Commission and the State Administration of Foreign Exchange said in statements that they had summoned Mr. Ma, who is the controlling shareholder of Ant, as well as Executive Chairman Eric Jing and Chief Executive Simon Hu. The statements didn’t provide details on the conversation. 

“Views regarding the health and stability of the financial sector were exchanged,” Ant said, confirming the meeting of financial regulators with Mr. Ma and the Hangzhou-based company’s management team.

“Ant Group is committed to implementing the meeting opinions in depth,” the company said, adding it would embrace regulation, promote economic development and provide inclusive financial services to ordinary citizens.

The owner of popular mobile payments and lifestyle app Alipay is close to completing initial public offerings in Hong Kong and Shanghai that would raise at least $34 billion—the largest sum ever raised by a company listing for the first time. Both offerings have been heavily oversubscribed by large and small investors. Trading of Ant’s shares is scheduled to begin in both markets on Thursday.

The regulators’ meeting with Messrs Ma, Jing and Hu is the culmination of long-simmering tensions between Ant and Chinese authorities, said Andrew Polk, a partner at consulting firm Trivium China.

“These meetings are usually held quietly behind closed doors,” Mr Polk said. “The fact that they are publicized means the regulators want to send a message: we are not going to back down from Ant; if anything, we are going to become more aggressive.”

Ant, whose Alipay business was carved out of e-commerce giant Alibaba Group Holding Ltd. in 2011, has become a powerful and disruptive force in modern-day finance in China. The company bills itself as a technology services provider, but it has fundamentally changed the way hundreds of millions of Chinese citizens spend, save, invest and borrow money. 

More than one billion people in China—or over 70% of the country’s population—use Alipay, which handled more than $17 trillion in digital payments in the year to June. A unit of Ant manages the country’s largest money-market mutual fund, which has more than 650 million individual investors. Alipay also facilitates consumer and business lending, and sells investment products and insurance. The balances of consumer and small business loans that Ant facilitated amounted to the equivalent of $314 billion as of June.

Parts of Ant’s businesses come under the oversight of China’s banking, insurance and securities regulators, which have in the past sought to slow the company’s growth and limit its direct competition with commercial banks and other traditional financial institutions.

In September, the country’s central bank introduced new rules that classified Ant and some other conglomerates as financial-holding companies, requiring them to put up more capital to back payments, lending and other finance businesses they own. 

Last month, Mr. Ma gave a controversial speech about financial regulation at a conference in Shanghai that was attended by senior Chinese leaders, current and former regulators, as well as business executives.

“We cannot regulate the future with yesterday’s means,” the 56-year-old Ant co-founder said at the forum. “There’s no systemic financial risks in China because there’s no financial system in China. The risks are a lack of systems,” Mr. Ma said.

China’s Vice President Wang Qishan, central bank governor Yi Gang and his predecessor, Zhou Xiaochuan, also spoke at the three-day summit that concluded on Oct. 25.

Mr. Ma’s recent comments likely didn’t go down well with regulators, who are “upping the ante,” said Mr. Polk of Trivium.

The billionaire’s speech also sparked discussions within China about technological innovations in the financial sector and the role of regulation.

Alipay, together with rival WeChat Pay, which is owned by Tencent Holdings Ltd., have made digital payments so convenient and popular that physical banknotes are no longer widely used. 

In recent years, however, other technology-driven financial platforms such as Internet peer-to-peer lenders, have been forced by financial regulators to stop expanding after some companies used unscrupulous practices to lure investors and loan defaults rose. 

Ant hasn’t been involved in peer-to-peer lending, and Mr. Ma said at the forum that technology innovation in finance shouldn’t be discredited because of it.

Source: Wall Street Journal by Jing Yang

Chinese Regulators Summon Ant Leaders Ahead of Gigantic IPO Chinese Regulators Summon Ant Leaders Ahead of Gigantic IPO Reviewed by TechCO on 11/04/2020 Rating: 5

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