China ordered Ant to re-examine its financial technology business-from wealth management to consumer credit and insurance, and return to its roots, namely payment services.
Although the central bank’s statement on Sunday lacks details, it poses a serious threat to the growth of billionaires and the most profitable businesses. Ma YunOnline financial empire. The regulator did not directly require the company to split, but emphasized that it is important for Ant to “understand the necessity of overhauling its business”
The authorities also accused Ant Company of poor corporate governance, disdain for regulatory requirements, and participated in regulatory arbitrage. The central bank said that Ant used its own advantages to exclude competitors and harmed the interests of hundreds of millions of consumers.
Ant responded to this, and it will set up a special team to meet the requirements of the regulatory agency. It will maintain the business operations of users, vowing not to increase prices for consumers and financial partners, while strengthening risk control.
The regulator added that the Hangzhou-based company needs to set up an independent financial holding company to comply with the rules and ensure that it has sufficient capital.
The following are some of the ideas of investors and analysts for restructuring:
Optimists say that regulators are just re-exercising their right to supervise the country’s financial industry and warn Internet companies, rather than making radical changes.
Beijing may be trying to set an example from Jack Ma’s ant, which is the largest of the many new but ubiquitous fintech platforms. Past repressions of this nature have dealt short-term blows to companies, leaving them almost unharmed.Social media giant Tencent Holdings LimitedFor example, in 2018, it became the main target of the campaign to combat children’s game addiction. Although their stocks were hit, they eventually recovered to record highs.
Members of ants, Alibaba Similarly, Group Holding Ltd. has also restored investor confidence after the authorities accused the company of short-term selling, involving everything from improperly squeezing merchants to turning a blind eye to fakes on e-commerce platforms. Kind of thing.
Zhang Kai, an analyst at Analysys Ltd, a market research firm, said: “I don’t think regulators are considering spin-off of Ant, because there is no financial technology company in China that has a monopoly. Other Chinese fintech companies issued warnings.”
Some people think this is an opportunity for ants. Zhang said that as the entire industry faces stricter supervision, Ant, as an industry leader, will have more resources to meet the challenges.
If regulators take action to split the Ant Group, the results will be even more worrying. This will complicate the shareholder structure and damage the company’s fastest growing business.
Before stopping the IPO, Ant Financial was valued at approximately US$315 billion, and it snatched investment from the world’s largest fund. These include: Warburg Pincus LLC, Carlyle Group Inc., Silver Lake Management LLC, Temasek Holdings Pte and GIC Pte.
Global investors supported the company, when the company was valued at approximately US$150 billion in the last round of financing in 2018. The breakup will make their return on investment uncertain, as the IPO schedule scheduled for November is now pushed into the distant future.
The government may require Ant Financial to spin off its more profitable businesses in wealth management, credit and insurance businesses and transfer them to a financial holding company, which will face stricter scrutiny.
Michael Norris, research and strategy manager at Shanghai-based Chinese consulting firm AgencyChina, said: “The emerging reality is that Chinese regulators are adopting similar regulatory measures against banks and fintech companies.”
The payment business of Ant alone is much less imagined. Although the service processed $17 trillion in transactions within a year, online payments have largely been losing money. Ant and Tencent, the two largest mobile payment operators, have heavily subsidized their businesses, using them as portals to win users. To make money, they use payment services to cross-sell products, including wealth management and credit.
Chen Shujin, director of China financial research at Jefferies Financial Group Inc. in Hong Kong, said: “Ant’s growth potential will be focused on payment services.” On the mainland, the online payment industry has been saturated, and Ant Financial’s market share has almost reached its limit. ”
The worst-case scenario is that Ants abandon their financial, credit and insurance businesses and cease operations for the sector that serves one billion people.
Its wealth management business (including the Yu’ebao platform that sells mutual funds and money market funds) accounts for 15% of revenue.
Credit technology, including Ant Financial’s North China and Jiefangbei divisions, is the group’s largest revenue driver, accounting for 39% of total revenue in the first six months of this year. It has provided loans to about 500 million people.
That kind of thinking will be supported by the view that Chinese leaders have become frustrated with the helplessness of high-tech billionaires and hope to teach them a lesson by stifling their business, even if it means short-term pain for the economy and the market .
China’s private sector has maintained a delicate relationship with the Communist Party for decades, and until recently has it been recognized as the center of China’s future. Many commentators attribute the recent crackdown on fintech companies to Jack Ma’s speech at a meeting in October, when Jack Ma condemned the shortsighted and outdated attempts to limit emerging fields.
Alibaba, Ant Financial and Tencent had a combined market value of nearly US$2 trillion in November, surpassing state-owned giants such as Bank of China Co., Ltd. to become the country’s most valuable company.
These three have invested billions of dollars in hundreds of emerging mobile and Internet companies, and have won the king’s status in the world’s largest smartphone and Internet market for users.
“The Communist Party is everything and everything in China. It controls everything.” Alex CapriHe is a researcher at the Hinrich Foundation in Singapore. He said: “The Chinese Communist Party has nothing to control. Anything that seems to be spinning outside its orbit in any way will soon be withdrawn,” he added, “We can expect to see more of that.”