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Jack Ma, China’s richest man and the founder of e-commerce platform Alibaba, offered a partial nationalization of the fintech company Ant Group, according to Wall Street Journal. The offer was put on the table on November 2nd, a few days after Ma publicly criticized Chinese regulatory agencies. Ant Group had been preparing for a record-breaking initial public offering.
Key Summary: It is reported that Ma said the government “can take any of the platforms Ant has, as long as the country needs it,” cowering in the face of unprecedented government regulations followed by Ma’s criticism. The very next day, however, Chinese government blocked Ant Group’s high-profile IPO plan. Some suspect that the Chinese government is after the customer data of more than 900 million Ant Group users.
The new black sheep, Ant: Ma, the largest shareholder of Ant Group, had to witness the firm’s IPO falling through, having openly criticized government regulatory agencies.
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Speaking at Bund Summit 2020 in Shanghai on October 24, Ma pushed for financial deregulation for a new generation of fintech firms, criticizing Chinese authorities. “The future should be a race toward innovation not a pageant for regulatory agencies,” said Ma. “State-own banks are suffering from a pawnshop mentality.”
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Chinese financial regulators immediately put themselves into action. First, they put strict limitations on online microloans, a key business for Ant Group. Loan limits were drastically reduced for consumers; those looking for a loan can file only one application at a time. Then, Ant’s IPO was shut down on November 3, only two days before the scheduled date. A week later, Chinese government disclosed a draft for its anti-trust law aimed at Ant Group.
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Ma’s proposal for partial nationalization of Ant came out on November 2, a day before its IPO was shut down, at a meeting with government officials. Such meetings—Yuē tán in Chinese—are often called by government agencies to chastise entrepreneurs. It is assumed that the shutdown of Ant’s IPO and following anti-trust regulations were pushed forward under the direct orders of President Xi and senior members of the Politburo.
Xi over Entrepreneurs: President Xi often abused regulations to target companies unwilling to follow his government’s policy directives.
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Dalian Wanda Group, founded by China’s once-richest man, Wang Jianlin, was eager to buy up an American filmmaker and movie theater chains despite open concerns from Chinese regulators. The state-owned banks unexpectedly ceased providing credit to Dalian Wanda and threatened the conglomerate with margin calls, forcing it to sell its hotel and theme park businesses totaling over $8 billion. Wu Xiaohui, the founder of Anbang Insurance Group, was sentenced to 18 years in prison in 2018 after aggressively picking up overseas hotels and real estate businesses.
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Chinese financial system is in full control of its government. State-owned banks effectively control corporations with its power to approve loans to businesses. Ant Group has operated in relative freedom with the full backing of its parent company Alibaba, but Ma eventually caved to government pressure.
The Goal of Chinese Government: Pressure on Ma and Ant Group is not only aimed at grooming corporations under the party control. It is also directed at reducing risk in the financial system by limiting the power of big platform businesses like Ant, similar to the policy measures pushed by the US and EU regulatory agencies. Some conjecture that the Chinese government is after the user data of nearly a billion citizens. These critics fear that Xi’s intention is at tightening government’s social control.
