Chinese regulators ordered Jack Ma’s online financial titan, Ant Group Co., to return to its roots as a payments service provider, threatening to accelerate the growth of its most lucrative consumer loan and wealth management businesses.
The central bank summoned Ant executives over the weekend and told them to “rectify” the company’s loan, insurance and wealth management services, the People’s Bank of China said in a statement Sunday. Although he did not go so far as to directly request the breaking of the company. , the central bank stressed that Ant needed to “understand the need to reform his business” and draw up a schedule as soon as possible.
The series of edicts poses a serious threat to the expansion of Ma’s online financial empire, which has grown rapidly from a PayPal-like operation to a full suite of services over the past 17 years. Before regulators intervened, Ant was primed for a public listing that would have valued her at more than $ 300 billion. The Hangzhou-based firm must now move forward in creating a separate financial holding company to ensure it has sufficient capital and protect personal private data, the central bank said.
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“This is the culmination of a series of regulations and sets the direction of Ant’s business going forward,” said Zhang Xiaoxi, an analyst at Beijing-based Gavekal Dragonomics. “We have not yet seen clear signs of a breakup. Ant is a giant player in the world and any breakup should be cautious.”
Authorities also criticized Ant for its poor corporate governance, its disregard for regulatory requirements and its participation in regulatory arbitration. The central bank said Ant used its dominance to shut out rivals, hurting the interests of its hundreds of millions of consumers.
Last week, China stepped up its scrutiny of the twin pillars of billionaire Ma’s internet dominance when it also launched an investigation into alleged monopoly practices at Ant’s subsidiary, Alibaba Group Holding Ltd., the e-commerce company’s shares listed on USA probe.
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The State Administration for Market Regulation sent investigators to Alibaba on Thursday and the investigation on the site was completed that day, according to a report on Saturday published on a news app run by the Zhejiang Daily. The report quoted an anonymous official from the local market regulation watchdog in Zhejiang province, where Alibaba is based.
The pressure on Ma is critical to a broader effort to curb an increasingly influential Internet sphere.
Once hailed as drivers of economic prosperity and symbols of the country’s technological prowess, the empires built by Ma, Tencent Holdings Ltd. chairman “Pony” Ma Huateng, and other tycoons are now under scrutiny after amassing hundreds of millions of users and gaining influence over almost every aspect of daily life in China.
Ma’s own empire is in crisis mode. In early December, with Ant under regulatory scrutiny, the government advised the man most closely identified with the meteoric rise of China Inc. to stay in the country, a person familiar with the matter said. Alibaba has lost more than $ 200 billion of market value since November, when regulators torpedoed what would have been a record $ 35 billion debut from Ant.
Its top executives are part of a work group that already has almost daily interactions with watchdogs. Meanwhile, regulators, including the China Banking and Insurance Regulatory Commission, are weighing which companies Ant should cede control to in order to contain the risks it poses to the economy, officials with knowledge of the matter said. They haven’t decided whether to split their different lines of operation, split their online and offline services, or go a completely different path.
“Ant’s growth potential will be limited with the focus again on its payments services,” said Shujin Chen, Hong Kong-based head of China financial research at Jefferies Financial Group Inc. “On the mainland, the industry of online payments is saturated and Ant’s market share has practically reached its limit. “
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