Chinese Regulators Demand Jack Ma Restructure Ant Into Financial Holding Firm

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Responding to pressure from Chinese finance regulators, Jack Ma will restructure Ant Group into a financial holding company, The Wall Street Journal reported on Wednesday (Jan. 27), citing sources.

The new entity will be supervised by the People’s Bank of China (PBoC), the country’s central bank, which will subject the company to rigid asset requirements, sources told WSJ. Ant has already given regulators a draft of a potential restructuring plan of the company. The draft is in review, but could potentially wrap prior to the Lunar New Year, China’s weeklong holiday in mid-February. The Financial Stability and Development Committee’s Vice Premier Liu He has to approve the plan before it can move forward, two of the sources said.

By categorizing all of Ant’s divisions under the umbrella of a single financial holding company, Chinese finance regulators will have oversight of all activities, the report noted.

Ant developed a working group headed by CEO Simon Hu to coordinate with regulators.

Ant’s Alipay app has in excess of one billion users in China and has handled some $17 trillion in digital payments in the 12 months leading up to June 2020. Alipay, which also sells insurance and investment products, has also extended short-term, unsecured loans to about 500 million people.

In December, Chinese regulators summoned Ant executives to a meeting about perceived issues with the company’s various business divisions. PBOC Deputy Governor Pan Gongsheng came down on Ant for “despising” regulatory compliance and “engaging in regulatory arbitrage,” per WSJ. He said regulators are demanding five parameters, including setting up a holding company and better safeguarding users’ data.

PBOC recently outlined new draft rules that seek to rein in any non-bank company that dominates at least half of the payments market or a combination of two companies that dominates at least two-thirds of the market. 

Chinese regulators said that Ant’s IPO could go forward once problems are resolved.

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