China Eyes Shrinks Jack Ma’s Business Empire

According to Chinese officials and government advisers familiar with the matter, Beijing wants to shrink Jack Ma’s technology and financial empire and possibly take a larger stake in its businesses, as regulators harm the billionaire in a campaign to oversee a increasingly influential case to strengthen. technical sphere.

According to a restructuring chart unveiled by China’s financial regulators this week, financial group technology group Ant Group Co. will once again have its origins as an online payment provider similar to PayPal Holdings Inc.,

while the more profitable investment and lending businesses would be limited.

The regulators, led by the central bank, also ordered Ant to form a separate financial holding company that would be subject to the kind of capital requirements applied to banks. It could open a door for large state-owned banks or other types of government-controlled entities to buy from the firm to boost its capital base, officials and advisers say.

China National Pension Fund, China Development Bank and China International Capital Corp.

, the country’s leading state investment bank, are already investors in Ant.

Mr. Mom, the richest person in China, helped define China’s new economy with the two companies he founded – Ant and its e-commerce subsidiary Alibaba Group Holding Ltd. Their businesses span payment services, online retail, cloud computing, wealth management and lending. Separately, Alibaba is facing an antitrust investigation that could also lead to a revamp of its business and assets.

The People’s Bank of China and the state administration for market regulation, which regulate Ant and Alibaba, did not respond to requests for comment. Ant declined to comment. Mr. Mom and Alibaba did not respond immediately.

A few days before Chinese fintech giant Ant Group was to be published in the world’s largest listing, regulators suspended plans. WSJ’s Quentin Webb explains the sudden turn of events and what the IPO suspension means for Ant’s future. Photo: Aly Song / Reuters

But if they are on mr. Mother-directed, China’s leaders face a tough balance in keeping entrepreneurs like him in check, without compromising the innovative spirit that has helped China’s technological and economic rise.

“This is undoubtedly the goal of restraining Ma Yun,” said an adviser to the China State Council’s anti-monopoly committee, the country’s leading government body, named Mr. Mom’s Chinese name said. “It’s like putting a bridle on a horse.”

It is difficult to understand the role that Mr. Mom’s companies played in China’s economy, too high to estimate. Together, Ant and Alibaba have allowed hundreds of millions of Chinese consumers and businesses to make a purchase, deposit money, make an investment, or take out a thumbs-up loan.

Since Mr. Until recently, Mother’s companies benefited from a relatively light regulatory onslaught, challenging the dominance of the public sector in areas such as banking and money management.

Chinese officials are concerned about how Ant uses data used by its Alipay payment program to encourage banks’ lending decisions.


alex plavevski / Shutterstock

But the days of laissez-faire are over. Authorities have undertaken in recent months to step up the regulation of an internet sector that is growing in scope and impact. While some other companies are also under scrutiny, including the popular social media app WeChat operator Tencent Holdings Ltd. and the operating firm Didi Chuxing Technology Co., regulators draw their attention to Mr. Mom and his companies.

Mr. Mom, flashy and outspoken, has long clashed with regulators, especially those at the People’s Bank of China, who have become wary of a vast empire that fears they are going on a rampage and trying to impose restrictions.

The tension came to a head at the end of October when Mr. Mom openly criticized the leader, Xi Jinping’s distinctive risk management initiative, while also complaining to regulators about stifling innovation – in a speech a few days before Ant, in which he is the controlling shareholder. , is set to be made public.

According to a person who is aware of the regulatory process, Mr. Xi paid little attention to Ant’s planned scholarship before the speech. “Thanks to Mom herself, the IPO climbed on Xi’s radar,” the person said.

Mr. Mom’s attack on regulators quickly backfired. This led to Mr. Xi had to personally call off the initial public offering, which is expected to be the largest ever, and which would value Ant more than $ 300 billion, and instruct regulators to look at risks that Mr. Mom’s rich holds.

Jack Ma’s Beijing Fight

Since then, China’s market and financial regulatory agencies have taken action. Officials are particularly concerned about how Ant is using data used by the Alipay payments app to encourage banks to work with the company to take out consumer loans and small businesses. Ant finances only a fraction of the loans, with the bulk of the funds coming from the banks, leaving the credit risks with them.

But even Mr. Xi, the most powerful leader in recent Chinese history, faces limitations in how far his government can go to get Mr. To combat Mother’s empire.

Most important among them is to avoid the perception of giving a significant blow to entrepreneurship at a time when the private sector is seen losing ground to state-owned enterprises. In addition, the leadership is concerned about a setback of international investors at a time when Beijing wants to ward off growing doubts about its commitment to market reforms and to foster more home-based businesses like Alibaba that can compete with their US counterparts.

To allay fears of state overreaction, officials said authorities had elected a deputy governor of the central bank with a pro-reputation to put the actions against Ant in a published question-and-answer session this week. discuss answer-exposition.

Pan Gongsheng, the deputy governor who previously oversaw the share sales for two of China’s largest state-owned banks before moving to the People’s Bank of China, called on Ant to revamp its business on the basis of market and legal principles. .

Mr. Pan nevertheless stressed that the company should ‘integrate corporate development into overall national development’, according to remarks released by the central bank on Sunday.

Ant said in a statement on Sunday that he would comply with the regulatory requirements and draw up a plan and timetable for the planned refurbishment. Mr. During a meeting with regulators in November, Ma offered to let the government ‘take any platforms Ant has for as long as the country needs them’, in an apparent attempt to save its relationship with Beijing. Mr. Mom has not appeared in public since his speech in October.

Meanwhile, China’s market regulator last week launched an antitrust investigation into Alibaba, which owns a third of Ant, due to allegations that the company used its dominant market position to put traders under pressure to sell only on its platforms.

Officials are also concerned about Alibaba’s threat to traditional retailers. “We have received many complaints about Alibaba expressing smaller competitors and the internet platforms taking away business from others,” said a government official with knowledge of the investigation.

Wang Fuqiang, who owns a laptop shop in Beijing, is among those who felt the pinch. Wang’s store gradually dropped sales as more people bought on Taobao, an online shopping center owned by Alibaba, and Inc.,

another great e-commerce player.

“Now most buyers come to my store to try out the laptops and take pictures,” he said. Wang, who has run the store for 17 years, said. “Then they would leave and buy it online.”

Write to Lingling Wei at [email protected]

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