The People’s Bank of China, the country’s central bank, has ordered Ant Group to rectify its businesses and comply with regulatory requirements. The action by the regulator against the world's largest financial technology company comes just days after China announced an anti-monopoly investigation of e-commerce giant Alibaba Group, which owns a 33 percent stake in Ant Group.
Earlier, the Chinese regulator halted Ant’s $37 billion stock debut in Shanghai and Hong Kong over regulatory changes in November, giving a severe blow to the firm’s expansion plans.
What is Ant Group
Ant traces its beginnings to Alipay, which was launched in 2004 as a payment service. Its Alipay app dominates digital payments in China, with more than 73 crore monthly users. The Hangzhou-based company also built an empire connecting China's borrowers and lenders, securing short-term loans within minutes. It was poised to be valued at more than $300 billion in its stock market debut.
The company has since expanded to offer insurance and investment products to its hundreds of millions of users in mainland China. Jack Ma, the founder of both Alibaba and Ant Group, is one of China’s richest and most prominent entrepreneurs.
What has the regulator ordered?
As per the statement by the regulator, Ant Group lacked a sound governance mechanism, defied regulatory compliance requirements and engaged in regulatory arbitrage. Further, it used its market position to exclude rivals and hurt the rights and interests of consumers.
The authorities responded to this by ordering Ant Group to establish a financial holding company and hold sufficient capital. They also said it should return to its payments origins, enhance transparency around transactions and prohibit unfair competition while improving corporate governance and ensuring that it complies with regulatory requirements for its businesses.
What it means to China
The scrutiny of Ant Group and Alibaba comes as China closely examines the influence of the country’s internet sector.
President Xi Jinping’s government is also worried about the dominance of competitors such as Alibaba and Tencent Holding. In addition, many see this action as a move by authorities aimed at reining in Jack Ma for his public criticism against the country's regulatory system in October for stifling innovation.
How has the firm responded
“We appreciate financial regulators’ guidance and help," the statement said. “The rectification is an opportunity for Ant Group to strengthen the foundation for our business to grow with full compliance, and to continue focusing on innovating for social good and serving small businesses.”
(With agency inputs)
(Edited by : Jomy)