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Chinese regulators have a bitter history with Ant Group beginning with Jack Ma’s criticism of national watchdogs, a trend that angered President Xi Jinping.
Chinese regulators are reportedly exploring an option to break the business of Ant Group in the latest effort by the government to bring its enforcement action on the tech sector. As reported by the Guardian, the Ant Group’s payment app which has over 1 billion registered users is set to be broken up with a separate application created for the company’s credit businesses.
Ant Group, owned by billionaire Jack Ma operates the Alipay app which alongside Tencent Holdings Ltd’s (HKG: 0700) WeChat Pay controls the largest portion of China’s digital payments. The Alipay app also runs a highly profitable loan business which according to The Guardian report accounted for about 10% of the country’s non-mortgage consumer loans last year.
From the regulator’s promptings, the firm’s two lending businesses, Huabei and Jiebei, are now likely to be operated distinctively from the rest of its financial offerings. Per the reports, the regulators are also aiming at compelling Ant Group to hand over the consumer data it uses to make its loan decisions to a new credit-scoring joint venture designed to be partly state-owned. An earlier report by Reuters has it that the new credit-scoring venture will see Ant and Zhejiang Tourism Investment Group each owning 35% of the venture.
The recent clampdown will notably affect more online lending companies beyond Ant Group. The latest enforcement action has weighed in on the listed shares of Alibaba Group Holdings Ltd (HKG: 9988), the multinational company backing the Ant Group. The shares fell as much as 4.23% to HKD160.80. The report also sent shockwaves across the entire tech ecosystem with Tencent dropping 2.45% to HKD478 and the Hang Seng Tech index also fell by more than 2% on Monday.
Chinese Regulators and Ant Group Crackdown
Chinese regulators have a bitter history with Ant Group beginning with Jack Ma’s criticism of national watchdogs, a trend that angered President Xi Jinping. Following the criticism, the regulators stopped the fintech giant’s proposed Initial Public Offering (IPO) which was projected to be worth $35 billion, a figure that positioned it to beat the world record at the time. The IPO suspension was reportedly noted to be instigated by President Xi.
Alibaba has often reiterated its determination to work with regulators, in order to stem the broad clampdowns.
“We will be proactive in supporting Ant Group to adapt to and embrace the evolving regulatory framework,” an Alibaba spokesperson said in a statement last year. “We have full confidence in Ant Group colleagues’ ability to do a good job. Society has high expectations for Alibaba. We will continue to work hard to not only meet but exceed expectations and fulfill our responsibility to society.”
While the company has tried to be in the good books of the regulators, more regulatory actions have been meted out with the enforcement of the payment of a $2.8 billion fine in an anti-competitive probe back in April.