Ant Group fined $1bn as China regulators conclude overhaul

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Beijing has fined Jack Ma’s Ant Group Rmb7.1bn ($984mn) as China’s financial regulators conclude an overhaul of the group almost three years after calling off the fintech giant’s $37bn initial public offering.

The “rectification” campaign for Ant led by China’s central bank has led to outside groups and state-owned companies taking half of its profitable lending business while assets at its flagship money market fund have halved from their peak value. The government has also vied for control over its vast trove of user data.

Ant’s restructuring began in November 2020 after a speech by Ma that criticised regulators and the country’s state-owned banks days before the fintech group’s planned listing.

Official backlash at Ma’s speech kicked off Beijing’s campaign to rein in the influence of its corporate titans and launch a wider crackdown on tech. Ma mostly disappeared from public view and moved to Japan for a period. 

“Most of the outstanding problems for financial platforms have been rectified,” the central bank and securities regulator said in a statement on Friday, noting their focus had now shifted to “normally supervising” groups such as Ant and Tencent.

Ant was fined for a number of violations, with its Alipay digital payments unit penalised nearly Rmb3bn for clearing, due diligence and consumer protection lapses.

“We will comply with the terms of the penalty in all earnestness and sincerity and continue to further enhance our compliance governance,” Ant said in a statement on Friday.

Tencent’s Tenpay was also fined nearly Rmb3bn, with the payments group accused of “jeopardising the prudent operations of the payment industry”, according to a central bank statement.

Tenpay had completed its “self-inspection and corresponding rectification work” while the “operational compliance capability of its payment business has been enhanced”, Tencent said in a statement on Friday.

Earlier this year Ma gave up control of Ant, which he split out of Alibaba in 2011. His retreat helped take worst-case scenarios for him and Ant off the table, according to two people close to financial regulators.

A probe Beijing launched into Ant and officials connected to its listing attempt and shareholding structure was also concluded without finding anything significantly detrimental to Ma, the people said. 

Meanwhile, in the years since Beijing launched its tech crackdown, officials have grown increasingly concerned that hobbling China’s fintech giants at home would also constrain their global operations. “They’ve done much better at expanding abroad than state-owned banks,” said one person close to financial regulators. 

Regulators in their statement said they would encourage Ant and Tencent to “increase their international competitiveness” along with delivering inclusive financial services.

Ma is now making more frequent trips to mainland China and giving low-key appearances at Alibaba, where he has returned to help pilot a turnround for the ecommerce giant. Alibaba’s shares rose nearly 6 per cent in New York trading on Friday.

Ant will at some point next year be able to restart efforts to list publicly, but regulators did not clarify the status of its credit scoring venture, which is set to be controlled by state-owned groups, nor a licence to operate as a financial holding company.

“Only after these tasks are completed can Ant truly be back to the track of normal business,” said Dong Ximiao, a financial regulation expert at Merchants Union Consumer Finance.

The government-led revamp has spurred ailing shareholders such as Boston-based Fidelity Investments to cut their estimates of Ant’s worth. The investment group now values it at about a quarter of the $235bn it looked likely to fetch in November 2020. 

Its credit arm, which was once China’s largest issuer of consumer credit, has also retreated. In an internal briefing with investors last year, Ant revealed it had trimmed its total issued loan balance to Rmb1.5tn at the end of September 2022, down from Rmb2.2tn in 2020, according to one investor briefed on the figure. Ant did not immediately respond to a request for comment on that detail.

With additional reporting from Nian Liu in Beijing