[ad_1]
Alibaba’s former financial subsidiary is said to be listed on the Shanghai and Hong Kong stock exchanges and not on Wall Street. The finance company processes a payment volume 25 times greater than that of PayPal.
The Ant Group logo on the financial giant’s headquarters building in Hangzhou, China.
Photo: Long Wei (VCG / Getty Images)
It should be by far the world’s largest initial public offering – Ant Financial, the financial company of Chinese online wholesaler Alibaba, is expected to make its stock market debut in Hong Kong and Shanghai this week. More than $ 34 billion will be raised. That would be significantly more than when oil company Saudi Aramco went public last year, which brought in $ 29.4 billion and is considered the world’s largest initial public offering so far.
It all started in 2004, shortly after Alibaba founder Jack Ma launched the website for Taobao, eBay’s Chinese counterpart. Unlike the American auction house, Taobao adapted to the needs of Chinese users and introduced its own online payment system: Alipay.
Trust account against mistrust
Anyone listing on Ebay at the time had to be able to trust that the seller would ship the auctioned goods and that the buyer would actually pay. Many Chinese do not have this confidence, too often they have been disappointed. With Alipay, the deposited money was only transferred when the merchandise actually reached the customer; that’s how long the money stayed with Alibaba. A kind of escrow account.
Meanwhile, it is difficult to imagine China without Alipay. You can pay with the service anywhere in the People’s Republic. To do this, the user scans a QR code with his smartphone and the money is transferred, both in the supermarket and in the kitchen. Even beggars often carry a paper code with them. In the last fiscal year, the company processed payments totaling 118 trillion yuan, about 16 trillion francs, almost 25 times more than PayPal, the largest online payment platform outside of China.
The division and its reasons
In 2011, Alibaba spun off its financial subsidiary Alipay. The reason was quite pragmatic: the authorities had applied for a Chinese banking license. For Alibaba that was a desperate venture at the time, as the group had two large foreign anchor shareholders with Softbank (Japan) and Yahoo (US).
First, the financial subsidiary was called Alibaba e-Commerce, then Ant Small and Micro Financial Services, and finally just Ant Group, which has long been much more than a payment processor.
Ant Financial is the most important sales channel for financial products in China, providing consumer loans that can be booked on the smartphone in no time. Ant Financial also manages loans for small and medium businesses. This is attractive to all those entrepreneurs who do not get money from state banks.
The gap in the market
China’s big money houses are not actually real banks – state pawnshops at best. The authorities inform the institutes exactly how much they can lend each month. Therefore, in order not to get into trouble and to keep administrative costs as low as possible, many banks prefer to grant their loans to state-owned companies. This takes a lot of money at once, and if necessary, the state is liable anyway.
The middle class, the true backbone of the Chinese economy, on the other hand, hardly receives any loans and sometimes has to refinance with shady shadow banks that charge significantly more interest. Ant Financial now makes 5 percent of all loans to midsize businesses. The market share of consumer loans is 15 percent.
Tight controls on Chinese capital prevent Ant Financial from gaining a foothold around the world.
Parent company Alibaba had chosen the New York technology exchange in 2014 for its own initial listing. Meanwhile, however, relations between the People’s Republic and the United States have deteriorated dramatically. That should be a major reason why Ant Financial is not listed on Wall Street, but in Hong Kong and Shanghai.
Otherwise, Ant Financial’s business is heavily focused on China. Here and there you can pay abroad with Alipay, but this offer is mainly aimed at Chinese tourists. Tight controls on Chinese capital prevent Ant Financial from gaining a foothold around the world. According to the law, each citizen can only import or export the equivalent of $ 50,000 a year. There is great fear in the apparatus that large sums of money will leave the country and the economy will lose its liquidity.
