Ma Yun, who eventually kneeled down to the Chinese government… “Submitted business reorganization plan to the authorities”

Input 2021.01.28 16:36

The Wall Street Journal (WSJ) reported on the 27th (local time) that Ant Group, a fintech company under the Alibaba Group in China, is restructuring into a holding company supervised by the Central Bank of China, citing an anonymous Ant Group official. It is said that Alibaba Group’s founder, Chairman Ma Yun, eventually succumbed to pressure from the Chinese authorities.

Ant Group is the parent company of Alipay, a payment and lifestyle app with over 1 billion users in China, and is a fintech (financial technology) company. Since it has not been classified as a bank, it has avoided strict regulations that apply to traditional financial institutions such as banks and insurance companies, except for some financial services.

It is known that the Ant Group recently submitted a restructuring plan to convert the group into a holding company at the request of the Chinese authorities. When the group turns into a holding company, the People’s Bank, the central bank of China, will be able to see and oversee all activities. In addition, Ant Group will be subject to the same regulations as banks, which will negatively affect future growth and profitability.

The reorganization plan is expected to be announced before the start of the Chinese New Year holiday in mid-next month. The reorganization proposal is finally approved by the Financial Stability Development Committee (FSDC), chaired by Deputy Prime Minister Liu Heo.

This reorganization plan is completely different from the business plan announced last year when Ant Group tried to simultaneously IPO in China and Hong Kong. In an announcement last year, company executives said that one of its subsidiaries other than Ant Group plans to become a financial holding company to carry out financial businesses such as asset management and consumer loans.

Earlier, Chairman Ma Yun attended a forum held in Shanghai on October 23 last year and criticized the Chinese authorities, saying, “China’s financial supervisory practice is the level of a pawn shop.” Next, Ant Group was called to the Chinese authorities for interviews with Chairman Ma Yun.

The Chinese authorities summoned Ant Group executives in December and demanded five improvements: establishing a financial holding company, improving corporate governance, and protecting personal data. Immediately after the interview, the deputy governor of the People’s Bank of China, Pan Gongsheng, issued a statement criticizing Ant Group as “ignoring the regulation” and “involved in the issue of regulatory arbitrage.”

The Chinese financial authorities are positively seeing the Ant Group’s reform plan, WSJ said. At the World Economic Forum meeting on the 26th, when asked if Ant Group’s IPO would be possible, the director of the People’s Bank Lee Kang replied, “There will be good results” if the laws and regulations are followed well.