Chinese authorities on Friday announced a 7.12 billion yuan ($984 million) fine for Ant Group, ending a year-long regulatory overhaul of the fintech company and marking a significant step to end a crackdown on the country’s internet sector.
China’s central bank, which pushed for Ant’s turnaround after the company’s $37 billion IPO collapsed in late 2020, said it will fine Ant 7.1 billion yuan, must stop service operations in medical aid crowdfunded Xianghubao and user fees.
The penalty is one of the largest fines for an internet company in China.
Ant and its subsidiaries violated laws on corporate governance and financial consumer protection, and engaged in business activities that should have been conducted by banks and insurance institutions, the People’s Bank of China (PBOC) said.
Next, the financial regulators will “focus on improving the ‘normalized’ level of management of businesses in financial platform companies, and bring all kinds of financial activities under supervision,” the PBOC said.
Ant said that it has completed the correction work. “We will comply with the terms of the penalty in all honesty and sincerity and will continue to improve our compliance management.” It closed Xianghubao in 2021.
Reuters reported earlier, citing sources, that Chinese authorities intend to disclose its fine to Ant as early as Friday.
Apart from Ant, the Chinese authorities also announced that they have fined Ping An Bank 000001.SZinsurer PICC Property and Casualty 2328.HKPostal Savings Bank 1658.HK and Tencent Holdings 0700.HK Tenpay, along with Tenpay was fined 2.4 billion yuan for committing violations in areas such as customer data management.
Alibaba Shares Jump
US-listed shares of Ant’s affiliate, e-commerce titan Alibaba Group, rose 3.3% in premarket trading after the PBOC’s announcement. Earlier in the day, its Hong Kong shares jumped as much as 6.4% after the Reuters report before giving up some gains.
Ant’s sanction paves the way for the fintech firm to obtain a financial holding company license, seek growth, and finally, revive its plans for a stock market debut.
For the broader tech sector, the fine marks a key step toward ending China’s crackdown on private enterprises, which began scrapping Ant’s IPO and which has since wiped out billions in value. in the market of many companies.
The Chinese government’s moves to “end sanctions, clarify its expectations, and draw clear compliance boundaries are key to strengthening confidence in the private sector,” said Rukim Kuang, founder of Beijing-based Lens Consulting.
Jeffrey Towson, a partner at TechMoat consulting and host of the Tech Strategy podcast, said Ant has an “amazing” growth path ahead now that its regulatory issues, which primarily affect in its domestic payment and credit businesses, resolved.
“Alipay+ is now international. Ant’s technology services business is also well-positioned for B2B contracts,” he said.
Following Ma’s Return to China
Founded by billionaire Jack Ma, Ant conducts payment processing, consumer lending and distribution of insurance products, among other businesses. In mid-2020, before its IPO was pulled, some investors valued it at more than $300 billion.
As of April 2021, Ant has formally undergone a sweeping business restructuring, which includes turning itself into a financial holding company that will subject it to rules and capital requirements similar to those for banks.
The announcement of the fine comes shortly after China’s ruling Communist Party appointed central bank Deputy Governor Pan Gongsheng as party secretary of the bank, a move two policy sources told Reuters was a prelude to appointing him as governor.
He is one of the key regulatory officials overseeing Ant’s turnaround and has attended several company meetings about fines and restructuring, according to the sources.
The National Financial Regulatory Administration (NFRA), a new government body under the State Council, is now the main regulator that will grant licenses to Ant, sources familiar with the matter said.
The NFRA did not respond to a Reuters request for comment. The PBOC did not respond to a request for comment on Pan’s role.
Sources earlier said Ant’s fine was revised to at least 8 billion yuan. Reuters reported in April that Chinese regulators were considering fining Ant about 5 billion yuan, a lower amount than they had initially thought.
Ant’s fine is the largest regulatory penalty imposed on a Chinese internet company since ride-hailing major Didi Global was fined $1.2 billion by China’s cybersecurity regulator last year.
Alibaba was fined 18 billion yuan in 2021 for antitrust violations.
The ant punishment comes at a time when Chinese authorities want to boost confidence in the private sector as the $17 trillion economy struggles to recover despite the lifting of zero-COVID curbs earlier this year.
It also follows Ma’s return to China earlier this year after months abroad. Ma, who also founded Alibaba, stepped down from the public in late 2020 after giving a speech criticizing China’s regulatory system, an event widely seen as a trigger for the industry crackdown.
He previously owned more than 50% of Ant’s voting rights, but in January said he would relinquish control of the company as part of the restructuring.
($1 = 7.2439 Chinese yuan renminbi)
(Reporting by Julie Zhu and Jane Xu; additional reporting by Jason Xue; editing by Muralikumar Anantharaman, Brenda Goh, David Holmes and Susan Fenton)
Photo: This Oct. 26, 2020, file photo, a view of Ant Group’s signage at the fintech giant’s headquarters compound in Hangzhou in east China’s Zhejiang province. (Chinatopix Via AP, File)