Jack Ma’s problems began when one of his big businesses was thwarted: the Formiga Group’s IPO.
Chinese mogul Jack Ma has not had a good end to the year.
Co-founder of Alibaba, one of the Asian nation’s largest business empires, has lost nearly $ 11 billion since late October, when authorities intensified scrutiny of his company and other large technology conglomerates.
This year Ma’s fortune reached US $ 61.7 billion and he was about to once again become the richest person in China.
However, its assets fell to $ 50.9 billion, according to the Bloomberg Billionaire Index, which placed it in fourth place in the ranking.
The businessman’s problems began when one of his big businesses was thwarted: the IPO of Grup Formiga.
In early November everything was ready for what would be the biggest IPO in history, but things did not go as planned.
The operation was unexpectedly suspended after a last-minute interrogation by Chinese financial regulators.
Some analysts have interpreted the fact as an attempt by Beijing to control the growth of giants such as the Ant Group and Ma himself, who tends to make awkward statements, according to BBC journalist Timothy McDonald from Singapore.
“Ma went from being a symbol of China’s potential and its technological progress, to a threat.”
The tycoon allegedly provoked the anger of the Chinese authorities when he publicly criticized the state-controlled Chinese bank compared to the “Pawnshops” who have no innovative vocation.
The power of digital finance
From then on things got complicated for the Formiga Group, a conglomerate that has expanded rapidly in recent years.
Ant’s most popular service, Alipay, started as Alibaba’s payment platform.
Ma publicly criticized state-controlled Chinese banking by comparing it to “pawnshops” that lack an innovative vocation.
He kept the money of the buyers in trust until they received the product they had purchased online.
Alipay was essential in the growth of Alibaba. It is now more widely used in China than credit cards.
When the IPO was suspended, the Hong Kong Stock Exchange stated that it was due to the fact that the Ant Group “may not meet the standards for listing and transparency requirements” and suggested that “recent changes” in the regulatory environment of digital finance could have been an obstacle.
“This was a big deal. But I don’t think China is going to bow to any deal. They will not put their financial system at risk for a business“, Argues Drew Bernstein, director of Marcum Bernstein & Pinchuk, a company that advises Chinese companies.
Unfair competition?
A few days ago the Central Bank of China ordered a reorganization of the Formiga Group’s operations, so that it can “rectify” its lending, insurance and wealth management services.
According to People’s Bank of China Deputy Governor Pa Gongsheng, regulators are analyzing “Ant Group’s poor corporate governance,” its challenge to certain regulations, and its practices to beat its competitors in order to avoid unfair competition.
Ant’s most popular service, Alipay, started as Alibaba’s payment platform.
The Ant Group has stated in a statement that it would establish a “rectification” working group and fully implement the regulatory requirements.
While some experts believe this new regulatory challenge is directed against Ma, others believe financial sector reform is a long-term policy goal of the Beijing government, which goes beyond the entrepreneur’s company.
While the company operates as China’s largest payment provider, with more than 730 million monthly users on its Alipay service, it is the firm’s credit practices that seem to be of most concern to regulators.
Ma is not the only one
Although Jack Ma has been at the center of the controversy, he is not the only one who has faced more regulatory scrutiny.
The financial technology sector seems to be in the sights of Chinese regulators.
Some firms are already adjusting the way they operate, probably to anticipate possible new regulations in the sector.
For example, JD Digits, Tencent, Baidu and Lufax stopped selling deposits that deserve interest on their platforms, after authorities forced the Ant Group to do the same.
“I don’t think anyone is immune at this stage and certainly the principles with which the Formiga Group links its consumers with financial products is very similar to what Tencent does, ”adds Norris.
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