While Jack Ma was trying to save his relationship with Beijing in early November, the besieged Chinese billionaire offered to hand over parts of his financial technology giant, Ant Group, to the Chinese government, according to people familiar with the matter.
“You can use any of the platforms that Ant has, as long as the country needs it,” Mr Ma, China’s richest man, said in an unusual session with regulators, people said.
The offer, which was not reported earlier, appeared to be a sort of Mr. Ma’s fault when he came face to face with central bank officials and Chinese agencies overseeing securities, banking and insurance. The November 2 meeting took place a few days before Ant was supposed to make it public, in what would have been the largest initial public offering in the world.
Mr. Ma had angered Beijing by launching a speech in October on President Xi Jinping’s signature campaign to control financial risks, saying it stifled innovation. Now, regulators had convened the meeting to express their concerns about Ant’s business model.
Its olive branch supply at the meeting failed to save the IPO, and since then, Beijing has stepped up efforts to curb the giants of China’s big technologies.
“Ant Group cannot confirm the details of the meeting with regulators held on November 2, 2020, because it is confidential,” a company spokesman said.
Mr. Ma’s effort shows how one of China’s most famous businessmen tried to get out of his situation while he and some of his colleagues tried to navigate a political landscape where priorities have shifted to greater control. state on companies considered to have grown too much and been powerful. .
The suspension of the sale of Ant shares for more than $ 34 billion after the Nov. 2 meeting was just the beginning. It was followed by a barrage of action against so-called “platform economy” or Internet-based companies advocated by large technology companies.
Xi personally ordered Chinese regulators to investigate the risks posed by Ant, according to Chinese officials with knowledge of the issue, and to close the IPO.
People close to China’s financial regulators say there is no decision, for now, to take Mr Ma on his bid. One plan being put forward is to subject Ant to stricter capital and leverage regulations, according to the people. In this scenario, state-owned banks or other types of state investors would buy from Ant to help cover any potential capital shortfall as a result of stricter rules.
Days before it was planned for Chinese fintech giant Ant Group to go public on what would have been the world’s largest share price, regulators suspended plans. Quentin Webb, of WSJ, explains the sudden turn of events and what it means to suspend the IPO for the future of Ant. Photo: Aly Song / Reuters
“The Chinese state has already effectively nationalized some of the financial infrastructure that Ant built, such as the interbank payment system that became NetsUnion,” said Martin Chorzempa, a researcher at the Peterson Institute for International Economics who specializes in the fintech sector of China. the company is now controlled by the central bank which cleans transactions between banks and external payment providers. “Thus, there is a precedent for nationalizing platforms that are considered to serve a critical political purpose.”
In recent years, the government led by Xi has shown its willingness to endanger private conglomerates considered undisciplined, no matter how politically invincible their founders may have been.
The Dalian Wanda group, property tycoon Wang Jianlin, for example, has been forced to sell assets, shrink its business and repay bank loans. Anbang Insurance Group, another high private engine, has been taken over by the state, while its founder Wu Xiaohui in 2018 was sentenced to 18 years in prison for fraud and embezzlement. In addition, the HNA group, a conglomerate of airlines and hotels, has had to withdraw from aggressive overseas acquisitions and sell assets.
Until recently, Mr. Ma also had a reputation for well-cultivated political ties. He has not made any public appearances since his Oct. 24 speech.
For years, companies such as the ant and e-commerce giant Alibaba Group Holding Ltd.
BABA -1.68%
, both controlled by Mr. Ma, and the Internet conglomerate Tencent Holdings had largely enjoyed relatively little government oversight of their quest to build and expand payments, loans, and other Internet-based businesses.
With Tencent’s WeChat and other apps developed by these companies, millions of Chinese consumers and small business owners can make a purchase, take a taxi, run an investment, or even take out a loan with a swipe of their smartphones. ligents. Companies such as Alibaba and Tencent have been so successful that Chinese leaders, including Premier Li Keqiang, consider the use of the Internet and big data to be crucial to driving future economic growth.
Chinese President Xi Jinping personally made the decision to stop the Ant Group’s initial public offering, which would have been the largest in the world.
Photo:
aly song / Reuters
However, Beijing’s leadership has also shown a growing unease with the wealth and influence these companies have built, as well as the risks involved in its slightly regulated activities, such as popular online loans handed by Mr. In addition, large technology companies in some cases have complicated the government’s own effort to use data and technology to tighten social control.
In November, China issued draft regulations aimed at preventing these companies from collaborating to share sensitive consumer data, establish agreements to block smaller rivals, and engage in other anti-competitive behaviors. Earlier this month, a meeting chaired by Mr. Xi, of the Communist Party’s Politburo, pledged to step up antitrust efforts next year and “prevent the disorderly expansion of capital,” a message that is thought to foreshadow greater repression against Internet giants.
Chinese officials say leaders are especially concerned that high-flying entrepreneurs, such as Mr. Ma, continue to raise capital while exposing the financial system to higher risks.
Even before Ant’s IPO was halted, for example, regulators were already worried about the frenzy of the deal. The sale of shares would have valued the company by more than JPMorgan Chase & Co. and Goldman Sachs Group.
Shortly after the Politburo meeting, China’s antitrust regulator fined Alibaba and a Tencent subsidiary for some acquisitions in recent years, again indicating that the days of laissez-faire are over.
The trend has its parallel in other parts of the world. The US, for example, is stepping up its antitrust research on Facebook Inc.
and Alphabet Inc
Google to determine if they abused their domain of social media and online search and advertising, respectively, in the Internet economy.
However, in the case of China, state-owned enterprises dominate the country’s telecommunications, financial services, airlines, energy and other sectors. By now emphasizing the “antitrust,” Xi points directly to China’s internet giants who have taken advantage of unprecedented data on millions of Chinese consumers and businesses.
Alibaba and Tencent have sometimes responded to requests from law enforcement and other authorities for access to user data, but so far have been reluctant to routinely share data streams that could help the government in other ways, such as now creating a FICO-like consumer credit scoring system used in the US
The country’s central bank and traditional lenders do not have the direct line with China’s free-spending young consumers, as does Ant. The company’s Alipay app is used by a billion Chinese, which has allowed it to collect consumer data and use unique algorithms to assess people’s solvency. But its data so far have not been fully integrated into the central bank’s credit scoring system, and these lacks of information placed Ant as a valuable partner in originating microcredit for banks, especially smaller ones. In return, Ant wrapped handsome profits.
For now, regulators are debating whether Alipay or any other part of Ant’s business represents monopolistic competition and, if so, what actions should be taken against the company.
“The chances of nationalizing at least parts of the company are not nil,” says a government adviser in Beijing.
—Jing Yang contributed to this article.
Write to Lingling Wei at [email protected]
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