Exclusive: China set to fine Ant Group over $1 billion, signaling revamp is closing in on final sources

Exclusive: China set to fine Ant Group over $1 billion, signaling revamp is closing in on final sources

HONG KONG, Nov 22 (Reuters) – Chinese authorities are set to fine Jack Ma’s Ant group more than $1 billion, six sources with direct knowledge of the matter said, paving the way at the end of the fintech’s two-year commitment. regulatory overhaul.

The People’s Bank of China (PBOC), which spearheaded Ant’s overhaul after the Chinese company’s $37 billion IPO was scuttled at the last minute in 2020, is the regulator preparing the fine, said five of the sources.

The central bank has been in informal communication with Ant about the fine for the past several months, three of the sources said. It plans to hold further discussions with other regulators on the Ant overhaul later this year and announce the fine as early as the second quarter of next year, a source said.

A fine against Ant could help pave the way for the company to obtain a long-awaited financial holding license, seek growth again and possibly revive its plans for a public market debut.

Ant’s fine would be the heaviest regulatory penalty imposed on a Chinese internet company since major Didi Global was fined $1.2 billion by China’s cybersecurity regulator in July.

Fintech subsidiary e-commerce giant Alibaba Group (9988.HK) was fined a record 18 billion yuan ($2.51 billion) last year for violating antitrust laws.

U.S.-listed shares of Alibaba slid 1.2% in morning trading.

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The sanctions are part of Beijing’s sweeping crackdown on the country’s tech giants, which has slashed hundreds of billions of dollars from their values ​​and slashed their revenues and profits.

But Chinese authorities have in recent months softened their tone on the tech crackdown as part of efforts to prop up an economy that has been hit by the COVID-19 pandemic.

A fine will likely focus on Ant’s alleged violations of “disordered capital expansion” and the corresponding financial risks its once freewheeling businesses have caused, one of the sources said.

Ant and the PBOC did not respond to requests for comment from Reuters.

All sources spoke on condition of anonymity as they were not authorized to speak to the media.

A stand of Ant Group is pictured at the Singapore FinTech Festival, Singapore November 4, 2022. REUTERS/Anshuman Daga

COMPANY REDESIGN

Chinese authorities abruptly halted Ant’s IPO, which was expected to be the world’s largest, in November 2020, shortly after billionaire founder Ma publicly criticized China’s regulatory system for stifling the market. ‘innovation.

In the months that followed, regulators moved to rein in Ma’s empire, starting with the antitrust probe into Alibaba. Ma, one of China’s most successful and influential businessmen, has remained largely unrecognized by the public since the crackdown.

Regulators have also pushed Ant, whose business spans payment processing, consumer lending and the distribution of insurance products, to revamp its business structure and place it under stricter regulatory oversight.

Ant has officially undergone a radical overhaul of its business since April last year, which includes its transformation into a financial holding company, subject to rules and capital requirements similar to those of banks.

The overhaul includes consolidating Ant’s two lucrative micro-lending businesses into a consumer finance unit and sharing its trove of data on more than a billion users with public companies, a move that is expected to curb its profitability and its valuation by reducing some of its activities. read more read more

The sanction imposed on Ant, however, is unlikely to be finalized until China appoints a number of senior officials to the State Council and other government bodies next year, four of the officials said. sources.

As China’s ruling Communist Party concluded its two-decade-long congress and central leadership reshuffle last month, high-level positions in the cabinet and government bodies are still subject to change, which usually takes place. during the annual meeting of parliament in early March.

Central bank chief Yi Gang, 64, is expected to step down as he approaches the official retirement age of 65 for ministerial-level officials.

China’s State Council Information Office, which handles media inquiries for the cabinet, did not respond to a request for comment.

Just before Ant’s IPO, the central bank formally issued rules to regulate the country’s large and often complex financial holding companies, as part of its effort to rein in systemic financial risks.

It has so far approved the establishment of three such companies, including China CITIC Financial Holdings.

The central bank’s local branch in the eastern city of Hangzhou, home to Ant’s headquarters, received the company’s application to set up a financial holding company in June, two of the six sources and a separate person said. .

However, the PBOC is unlikely to officially release the app until Ant completes its redesign, the sources added.

Reporting by Julie Zhu in Hong Kong; additional reporting by Xu Jing in Beijing; Editing by Sumeet Chatterjee and Muralikumar Anantharaman

Our standards: The Thomson Reuters Trust Principles.

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