China urges Jack Ma Ant Group to return to their payment roots and set curbs

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The central bank said Ant used his dominance to shut out rivals.

Chinese regulators ordered Jack Ma’s online financial titan Ant Group Co. to return to its roots as a payment services provider and threatened to slow growth in its most lucrative businesses, consumer credit and wealth management.

The central bank summoned Ant executives over the weekend and told them to “correct” the company’s credit, insurance and asset management services, the People’s Bank of China said in a statement on Sunday. While the central bank did not ask directly about winding up the company, it insisted that Ant “understands the need to overhaul his business” and put a timeline in place as soon as possible.

The suite of edicts poses a serious threat to the expansion of Ma’s online financial empire, which has rapidly evolved from a PayPal-like operation to a full suite of services over the past 17 years. Before regulators intervened, Ant was ready for a public listing that would be valued at more than $ 300 billion. Existing supporters included Carlyle Group Inc. and Silver Lake Management LLC. The Hangzhou-based company must now press ahead with the establishment of a separate financial holding company to ensure it has sufficient capital and protects personal private information, the central bank said.

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“This is the culmination of a series of regulations and sets the direction for Ant’s future business,” said Zhang Xiaoxi, a Beijing-based analyst with Gavekal Dragonomics. “We haven’t seen any clear signs of a breakup. Ant is a huge player in the world and any breakup has to be careful.”

Authorities have also beaten Ant for underperforming corporate governance, disregarding regulatory requirements and engaging in regulatory arbitrage. The central bank said Ant used his dominance to shut out rivals and harm the interests of its hundreds of millions of consumers.

China stepped up its scrutiny of the two pillars of billionaire Ma’s internet domain last week when it launched an investigation into alleged monopoly practices at Ant subsidiary Alibaba Group Holding Ltd. launched the probe.

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The state administration of market regulation dispatched investigators to Alibaba on Thursday, and the on-site investigation was completed that day. This came out from a Saturday report posted on a Zhejiang Daily news app. The report quoted an unnamed official from the local market regulator in Zhejiang Province, where Alibaba is based.

Ant said in a statement on Sunday that it will set up a special team to come up with suggestions and a schedule for an overhaul. It will keep business operations going for users and promises to keep costs unchanged for consumers and financial partners while tightening risk control.

The pressure on Ma is central to broader efforts to contain an increasingly influential Internet sphere. Regulators said they would “resolutely” break the monopoly practice and have “no tolerance” for illegal financial activity while preserving the global competitiveness of Chinese fintech companies in the future.

The empires built by Tencent Holdings Ltd. Chairman Ma, “Pony” Ma Huateng, and other tycoons, once hailed as the drivers of economic prosperity and a symbol of the country’s technological prowess, are now after the gathering of hundreds Millions of users and audited influence on almost every aspect of daily life in China.

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Ma’s own realm is in crisis mode. In early December, when Ant was under regulatory control, the man most likely linked to the meteoric rise of China Inc. was advised by the government to stay in the country, said a person familiar with the matter. Alibaba has lost more than $ 200 billion in market value since November, when regulators torpedoed a record $ 35 billion debut for ants.

Alibaba’s chief executive officer Daniel Zhang said in a meeting with local regulators on Friday that the only way the company will thrive in the future is by following the rules, the state-backed China News Service reported.

Alibaba said Monday it would increase its share buyback from $ 6 billion to $ 10 billion. The company’s board of directors approved the increased program, which ran for two years through the end of 2022. He had started buying back shares that quarter.

Ant’s top executives are part of a task force that already interacts with watch dogs almost every day. Meanwhile, regulators, including China’s banking and insurance regulators, are weighing which companies Ant should give up control in order to contain the associated risks to the economy, officials with knowledge of the matter said. They haven’t made up their mind whether to split up their various business areas, split their online and offline services, or take a different route.

Ant also includes Warburg Pincus LLC, Temasek Holdings Pte, and GIC Pte. as a supporter.

“Ant’s growth potential will be limited by returning focus to its payment services,” said Shujin Chen, director of Chinese financial research in China at Jefferies Financial Group Inc. “On the mainland, online payments are saturated and Ant’s market share is so pretty much reached its limit. “

(This story was not edited by GossipMantri staff and is automatically generated from a syndicated feed.)

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