THE NEUTRAL ZONE
Regulators for the Shanghai Stock Exchange abruptly halted Chinese financial company Ant Group’s historically large initial public offering, citing concerns over the company’s ability to meet “information disclosure requirements.” The IPO was projected to raise around $37 billion and raise the Alibaba subsidiary Ant Group’s market value to around $300 billion.
Ant Group operates Alipay, which is the largest financial technology company in the world. Alipay claims 700 million monthly active users, and Ant has given loans to around 500 million people through its lending platforms. The China Banking and Insurance Regulatory Commission issued new rules on Monday for financial tech companies that require higher capital requirements on loans as well as stricter controls on lending across provincial borders. Ant Group and Chinese government-backed regulators clashed on how fintech should be regulated. The banks argued that tech-based financial services should be regulated the same as if they were traditional banks, while Ant Group co-founder Jack Ma believes that traditional regulation will stifle technological advancement.
In an unprecedented move, several Chinese regulators, including the People’s Bank of China, summoned Ma and two Ant Group executives for questioning on Monday after Ma publicly criticized Chinese regulators for being too risk-averse. Ant Group issued a statement following Monday’s meeting expressing a willingness to cooperate with regulatory bodies as well as reaffirming their commitment to innovation.
“Big banks are like big rivers … but we need ponds, creeks and small channels in the system. Without these in an ecosystem, floods and droughts will always happen here and there,” Ma said last month.
China Halts Ant Group’s Blockbuster I.P.O. – New York Times – 11/3/2020
But in the process, Ant has challenged the dominance of China’s state-run banks and other institutions, which have long enjoyed a privileged place in the country’s financial and political system. Regulators have looked warily upon Ant’s fast growth in certain areas, fearful it might become too big to rescue in the event of a meltdown.
Jack Ma’s Ant Group: World’s biggest market debut suspended – BBC News – 11/3/2020
In his prospectus letter, Ant’s executive chairman, Eric Jing, had waxed lyrical about how the company is revolutionising the future of money. But perhaps what he and Jack Ma – the billionaire founder of Alibaba and the largest controlling shareholder in Ant – didn’t factor in is how ultimately, no matter revolutionary your business is, if it’s operating in China, it still needs the blessing of Chinese regulators.
China postpones Ant’s colossal IPO after closed-door talk with Jack Ma – TechCrunch – 11/3/2020
Ant has over the years tried to be in the good graces of the authorities. When it rebranded from Ant Financial to Ant Technology this year, the gesture was seen as an attempt to shed the firm’s image as an intimidating financial giant and stress the one of a benevolent technology provider. The campaign began a few years ago, prompting the firm to devise awkward coinages like “techfin” (as opposed to “fintech”) and declare it wasn’t competing with traditional financial institutions, many of which were state-led.