Jack Ma offers an ant show to satisfy the Chinese organizers

While Jack Ma was trying to salvage his relationship with Beijing in early November, the besieged Chinese billionaire offered to hand over parts of the fintech giant, Ant Group, to the Chinese government, according to people familiar with the matter.

Mr. Ma, the richest man in China suggested, “You can take any of the platforms that Ant has, as long as the country needs it.” In an extraordinary session with the organizers, People said.

The show, which was previously unreported, appeared to be a mistake of some sort from Mr. Ma as he found himself face to face with officials from the Chinese central bank and agencies overseeing securities, banking and insurance. The November 2 meeting took place a few days before Ant went public, in what would have been the largest initial public offering in the world.

Ma had angered Beijing when he criticized President Xi Jinping’s signature campaign in October for controlling financial risks, saying it stifles innovation. Now, the organizers called the meeting To voice their concerns about Ant’s business model.

His olive branch offer at the meeting failed to save the IPO, and Beijing has since ramped up its efforts to rein in China’s tech giants.

A company spokesman said, “Ant Group cannot confirm the details of the meeting with the organizers, which was held on November 2, 2020, because it is confidential.”

Suspended sale of Ant’s stake of more than $ 34 billion That followed the November 2 meeting was just the beginning. A barrage of measures followed against the so-called “platform economy,” or Internet-based companies backed by big tech companies.

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Mr. Xi personally ordered Chinese regulators to investigate the risks posed by Ant, according to Chinese officials familiar with the matter, and Ant’s IPO closes.

People close to financial regulators in China say that there is no decision, at the moment, to take the master what he has to offer. One plan being considered involves subjecting Ant to tighter regulations regarding capital and leverage, according to People. Under this scenario, state banks or other types of state investors would buy Ant to help cover any potential capital shortages as a result of the tighter rules.

Days before the Chinese fintech giant Ant Group was due to go public in what would have been the world’s largest list, regulators suspended the plans. WSJ’s Quentin Webb explains the sudden turn of events and what the IPO suspension means for Ant’s future. Photo: Ali Song / Reuters

“The Chinese state has already nationalized some of the financial infrastructure that Ant has built, such as the interbank payment system that has become NetsUnion,” said Martin Churzimba, a research fellow at the Peterson Institute for International Economics and a specialist in the fintech sector in China, referring to the company he controls. Now the central bank that liquidates transactions between banks and third-party payment providers. “So there is precedent for nationalizing platforms that are seen to serve a critical political purpose.”

The government under Mr. Xi has shown in recent years an intent to bring in private conglomerates that are seen as undisciplined – however politically impregnable its founders appear.

For example, the Dalian Wanda Group owned by real estate mogul Wang Jianlin was forced to sell assets, curtail its business and repay bank loans. The state acquired the Anbang Insurance Group, another high-end private cylinder, while its founder Wu Xiaohui was in 2018. Sentenced to 18 years in prison For fraud and embezzlement. In addition, the HNA Group, the airline and hotel conglomerate, was forced to pull back on aggressive overseas acquisitions and asset sales.

Until recently, Mr. Ma had a reputation for good political relations. He has not made any public appearances since his speech on October 24.

For years, companies have been including Ant and the e-commerce giant

Alibaba Group Holding Ltd.

Baba -1.68%

Both are controlled by Mr. Ma and the Internet conglomerate

Tencent Holdings

It has largely enjoyed relatively little government oversight as it strives to build and expand online and other payments and lending operations and businesses.

With Tencent’s WeChat and other apps developed by these companies, millions of Chinese consumers and small business owners can make a purchase, call a taxi, make an investment, or even take out a loan by swiping through their smartphones. Companies like Alibaba and Tencent are so successful that Chinese leaders, including Prime Minister Li Keqiang, regularly praise the use of the internet and big data as essential to driving future economic growth.

Chinese President Xi Jinping personally made the decision to halt the initial public offering of the Ant Group, which was to be the largest in the world.


Song Ali / Reuters

However, Beijing’s leadership has also shown a growing unease with the wealth and influence these companies have built as well as the risks posed by their lightly regulated activities, such as the online lending made famous by Mr. Ma’s Ant. Additionally, major tech companies have in some cases complicated government efforts to use data and technology to tighten social control.

In November, China promulgated draft regulations It aims to prevent these companies from colluding to share sensitive consumer data, forming agreements to ban smaller competitors and engaging in other non-competitive behaviors. Earlier this month, a meeting chaired by Mr. Xi of the Communist Party’s Politburo pledged to boost antitrust efforts next year and “prevent uncontrolled expansion of capital” – a message seen as heralding a greater crackdown on the internet giants.

Chinese officials say the leadership is particularly concerned that high-profile entrepreneurs like Mr. Ma continue to attract capital while exposing the financial system to greater risks.

Even before Ant’s IPO was halted, for example, regulators were already wary of the frenzy over the deal. Selling the shares would have more than doubled the value of the company

C. B. Morgan Chase

& Co. And the

Goldman Sachs Group.

Shortly after the Politburo meeting, the China antitrust regulator fined Alibaba and a Tencent subsidiary for some acquisitions in past years – again signaling the end of the days of non-intervention.

The trend has parallels elsewhere in the world. The United States, for example, is ramping up its antitrust investigations in

The social networking site Facebook a company

And the

the alphabet a company

Google to determine whether they have abused their dominance of social media, online search and advertising, respectively, in the internet economy.

However, in the case of China, state-owned enterprises (SOEs) stand out above the country’s telecommunications, financial services, airlines, energy, and other sectors. By emphasizing “antitrust” now, Mr. Xi is directly targeting the Chinese internet giants who have slandered unprecedented data on millions of Chinese consumers and companies.

Alibaba and Tencent have sometimes responded to demands by law enforcement and other authorities to access user data, but have so far routinely resisted sharing sets of data that could help the government in other ways, such as building the FICO-style consumer credit scoring system used in the United States.

The country’s central bank and traditional lenders don’t have a beeline with young Chinese consumers spending for free as you do. One billion Chinese use the company’s Alipay app, which has enabled it to collect collections of consumer data and use proprietary algorithms to assess an individual’s creditworthiness. But its data so far has not been fully integrated into the central bank’s credit rating system, and such gaps in information have made Ant an important partner in creating small loans to banks, especially small banks. In return, you reaped big profits.

At the moment, the regulators are debating whether Alipay or any other parts of Ant’s business represent monopolistic competition, and if so, what measures should be taken against the company.

“The chances of nationalizing at least parts of the company are not zero,” says a government advisor in Beijing.

Write to Lingling Wei at [email protected]

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