Chinese authorities are expected to announce a fine of at least 8 billion yuan ($1.1 billion) on Ant Group as soon as Friday, sources with direct knowledge of the matter said, ending the fintech company’s years-long regulatory overhaul. The Peoples Bank of China (PBOC), which has been driving the revamp at Ant after its $37 billion IPO was scuttled in late 2020, is set to disclose the fine in the coming days, the sources told Reuters.
The move will mark the largest fine for a tech firm in the country since ride-hailing major Didi Global was penalized $1.2 billion by Beijings cybersecurity authority last year. It comes as the government seeks to bolster private sector confidence in its economy, which remains under pressure despite lifting zero coronavirus curbs earlier this year.
Founded by billionaire Jack Ma, Ant is one of the world’s biggest Internet finance companies. It handles payment processing, consumer lending, and insurance product distribution, among other tasks. Its vast trove of user data was seen as an essential advantage over its rivals. But the sweeping overhaul, forced by the PBOC, will remove this advantage by merging Ant’s two highly profitable microloan units and limiting its access to such information.
It also imposes new minimum capital requirements on China’s largest payments provider, with 730 million monthly users of its Alipay service. And it will dismantle a controversial online credit-scoring service that lent money to borrowers without checking their credentials.
The overhaul will also require the re-establishment of a financial holding company and a separate consumer credit reporting entity and more transparency in how it does business. The PBOC will also limit the size of investments Ant can make in other companies and restrict the amount of capital it can invest abroad.
China has brought a hard-edged approach to enforcing its laws in the era of Xi Jinping, its leader. Globe-straddling conglomerates have been leashed, and a tycoon disappeared after criticizing the government’s handling of the coronavirus crisis.
Ma, once a high-profile entrepreneur who captivated audiences with his rags-to-riches personal story and penchant for public showmanship, has kept a low profile since the failed IPO. He has remained active in charity work, though.
Still, his move to cede control of Ant is the most significant signal yet that Chinese regulators have targeted him in a widening crackdown as they step up official efforts to tighten control over fast-growing technology industries. If it goes through, his move will further highlight the precarious position of a class of technology companies that once embraced a Silicon Valley mindset. They now find themselves in a tug-of-war between Chinese regulators and the global investment community that once championed them. The outcome could have far-reaching implications for the global digital economy and beyond.
