Ma Yun’s nightmare in Xi Jinping… review of forced disposition of investment by Ant Group

China’s Alibaba Group’s affiliate Ant Group is in danger of being forced to dispose of its external investment. This is because the fierce regulation of the financial authorities intensified targeting companies owned by founder Ma Yun, who made sharp comments against the Chinese financial authorities. As a result, there is a greater possibility that Ant Group’s plan, which was promoting business expansion using synergy effects with startups such as fintech and sharing industries, will also be in vain.

Reuters and Bloomberg News reported in December last year, citing a number of officials who requested anonymity that the China Securities Supervisory Commission (SCRC) is considering forcibly disposing of investments in some technology and fintech startups and financial industries owned by Ant Group. It was reported on the 31st (local time).

Putting together the reports of Reuters and Bloomberg, Chinese financial authorities have recently set out to review the external investments that Ant Group has made over the past few years. Among them, the authorities are planning to forcibly dispose of the investment shares that are “not essential to the business”. It is not known specifically what investments are subject to forced disposal.

This is interpreted as a measure following the recent financial authorities ordered Ant Group to close some businesses. Bloomberg reported on December 27 (local time) last year that the People’s Bank of China (PBOC), the Bank Supervisory Commission, and the Securities Supervisory Commission recently demanded against Ant Group that “the business needs to be reorganized entirely.”

It is unclear whether there is a legal basis for financial authorities to forcibly sell Ant Group’s external investments. However, there is an analysis that Ant Group can induce the sale of some investment stakes related to the financial industry through regulation while converting from a commercial bank to a financial holding company.

On the day, Bloomberg quoted an anonymous official, “(Ant Group’s) financial investments do not exceed 15% of net assets, which is currently regulated by the authorities. At the current level, switching to a financial holding company does not mean that it is necessary to sell financial-related investment shares. “If the authorities tighten regulations, they may have to sell (shares).”

According to the fierce regulations of the financial authorities, Ant Group’s move to sell some of its investment shares was also spotted. Reuters quoted an anonymous official on the day and said, “Ant Group is in contact with private equity firms and is moving to sell its shares in the portfolio. Among the targets for sale, Chinese shared bicycle company’Hellobike’ is also included. It’s done.”

However, this is only a fraction of the investment stake that financial authorities may demand to sell to Ant Group. According to Reuters, Ant Group’s external investments total 81 cases, totaling 21.6 billion dollars (23,500.8 billion won). More than half of them, 55 cases, are Chinese internal institutions and enterprises, and the size of them is 17.4 billion dollars (18,9312 billion won), accounting for the majority of the investment. This included China Post and Savings Bank and China’s largest vehicle-sharing company, Didi Chushing.

As China’s financial authorities’ pressure on Ma Yun intensifies, the position of the Ant Group, which he owns, is expected to gradually narrow. Earlier, the Ant Group suffered a cessation of its IPO, which was expected to be worth $37 billion (40 trillion KRW) in November last year. It was the order of President Xi Jinping, who was angry at Ma Yun’s sharp remarks to the financial authorities at a keynote speech at the Shanghai Bund Financial Summit last October.

Reuters said on the day, “Ant Group has been promoting synergy effects (with existing businesses) through external corporate investments in recent years. If the stakes invested outside are sold, the influence of the fast-growing fintech industry in China is significantly reduced. I will do it.”

Reporter Yoon Sang-eon [email protected]