Fintech giant Ant Group’s troubles began in November 2020, when Chinese regulators suspended its $34 billion IPO two days before a dual listing in Shanghai and Hong Kong. Beijing made it clear that the Alibaba-owned company would not be able to list in its current form.

China’s central bank then announced in December 2020 that it had summoned Ant for a meeting with financial regulators led by the People’s Bank of China (PBOC), and by February, the fintech platform had reportedly reached a deal to restructure.

Ant met with regulators again on April 12, after which the company said that it had “completed the formulation of our rectification plan,” with the company and regulators each issuing somewhat different five-point summaries. Last week, we tried to figure out what we could say about the company’s future from these plans, focusing on an interview on the rectification plan and fintech industry regulation with PBOC deputy governor Pan Gongsheng.

China Voices

In TechNode’s members-only translation column, we bring you selections from discussions about tech on the Chinese internet. TechNode has not independently verified the claims made below.

READ MORE: Deciphering the Ant Group rectification plan

But what are observers saying in Chinese?

Searching for comment on the Ant rectification plan, TechNode found very few independent analyses. But within the range of commentary available, we saw dramatic predictions that included Ant itself being broken up, and Ant-like rectification plans being imposed on a broad range of big tech fintech platforms. 

The key question:

Has the other shoe dropped?

Ant’s restructuring will be costly, and complicated. But maybe the announcement of a plan means that at least it can move on, some commentators write.

Latest Caixin Weekly | Ant’s restructuring begins
Caixin, April 18

Half a year after braking hard on its IPO, the shoe has basically dropped for Ant Group’s restructuring.  

Chinese finance magazine Caijing Tianxia agrees in “Summoned for a second time, Ant is not the same Ant,” citing a 9% jump in parent company Alibaba’s stock price on April 12 as a reflection of the market’s belief that the uncertainty is now resolved. Caijing Tianxia writes that the market has now reversed the previous drop in Alibaba’s share price when Ant Group’s IPO was halted in November 2020. 

But another expert warns that while restructuring Ant as a financial institution will put it more under Beijing’s control, the action by itself is too vague to determine the future of the company.

Summoned for a second time, Ant is not the same Ant
Caijing Tianxia Weekly, April 13

“Currently, it is still too early to say the shoe has dropped,” [Chinese Academy of Social Sciences] senior financial researcher Zhang Ming told Caijing Tianxia. This means that in the future Ant will be considered a financial institution, the core purpose being one of control, but the specifics of how supervision will land still require the development of further rules. 

What’s next for Ant?

Zhang also makes a more dramatic prediction: he argued that Ant will most likely need to be broken up in order to comply with national regulations.

“Ant currently has only determined an overall direction. Whether it will specifically be broken up in the future or not is still very difficult to tell. But without being broken up, supervision would be very difficult to implement.” Zhang Ming said that splitting the asset management business from the investment banking subsidiary is already a sort of correction. If Ant does not continue breaking apart, it will then be very difficult to really fit into the supervision framework of the People’s Bank of China, the China Banking and Insurance Regulatory Commission, and the China Securities Regulatory Commission. Would it be the Banking and Insurance Regulatory Commission or the Securities Regulatory Commission that would be responsible? When banks make missteps, the Banking and Insurance Regulatory Commission issues a notice. But if Ant were to be placed under supervision, who would issue the notice? It probably won’t continue being a ‘special affairs’ case.”

—Caijing Tianxia Weekly, April 13

Ant restructures, businesses that annually create over RMB 160 billion in revenue will all be affected
Gong Fangyi
Late Post, April 13

Gong Fangyi, in WeChat public account Late Post, predicts that regulations will cause Ant Group’s money market fund Yu’ebao to shrink in size, limiting the company’s earning potential. Gong argues that restrictions on Yu’ebao will have consequences for the rest of the company, because it is the basis of the company’s cash flow, a platform allowing Ant to offer financial services to users and to turn a profit off of unused cash stored in Alipay.

The scale of Yu’e bao has also been limited by regulations. Yu’e bao is the basis of Ant’s financial flow. Hundreds of millions of Alipay users put their unused money in Yu’e bao where they begin investing, and then, they purchase funds, investment products, and use Huabei.

Who’s next?

It’s clear to all commentators that Ant isn’t just Ant: it’s a precedent. Pan mentions both fintech and the broader platform economy in his interview. How far does the precedent stretch?

Paidai argues that fintech is part of the financial sector. Like many articles, it quotes a key line phrase from Pan: platform companies “should not make technology a ‘camouflage’ for illegal activities.”

Ant Group summoned again, things are too difficult for Alibaba
Zhang Xiaomang
Paidai, April 13

In recent years, fintech and the platform economy have rapidly developed. This has played an important role in improving the effectiveness of financial services, in promoting the spread of beneficial aspects of the financial system, and in lowering transaction costs. At the same time, because [fintech] has the specific characteristics of crossover operations, mixed-industry operations, and cross-regional operations, the rate at which risk spreads is higher, the surface area is greater, and the negative spillover effects should then be stronger. This has created new challenges for financial supervision.

[Regulators] meet with Ant Group again, what serious signals have been released?
Xia Bin
The Country is a ‘Through Train’, April 12

A WeChat account operated by the state-owned China News Service, also writes that Ant Group’s restructuring sets a precedent for the financial sector.

With an eye for the long term, while taking into account the current situation, making up for shortcomings, strengthening weaknesses, it should be said that the idea that all financial activities will be under financial supervision is very clear.

Pan’s answers this time also emphasize that the Financial Management Department will continue the principles of “fair supervision” and “strict supervision.” In other words, for any business that even touches upon financial services, the Financial Management Department will certainly implement strict supervision.

But it goes farther, writing that platform businesses as a whole should follow Ant. After describing monopolistic tendencies in the fintech industry, the article says that the same issues exist in the broader platform economy.

This list of problems [in fintech] has commonalities with other platform businesses. Promoting the issue of self-evaluation in platform companies, promptly and proactively making changes is also the deep purpose in [Pan Gongsheng] answering reporters’ questions.

Experts interviewed by Caijing Tianxia predict that the fallout from Ant would affect much of Big Tech, noting that most of the major tech empires have mimicked at least some of the behaviors that got Ant in trouble. Director of the Institute of Finance and Banking at the Chinese Academy of Social Sciences Yin Zhentao told Caijing Tianxia that because Ant Group opened a can of worms as the leader, other e-commerce and social networking platforms that have gotten involved in fintech will also need to change.

As a pioneer in internet fintech, Ant can be said to have gotten off to a bad start. Up to the present, digital payment and credit have almost become the standard products for internet companies getting involved in the financial sector, which include Tencent, JD.com. Yin Zhentao believes that after this time of Ant Group being summoned, other internet companies will also implement the corresponding changes.

Caijing Tianxia Weekly, April 13

Economist Song Qinghui also told Caijing Tianxia that Ant is not the only company with unfair market practices as identified by Chinese regulators, naming other tech majors with fintech plays. 

Ant Group undoubtedly is a pioneer in internet fintech. After it, giants such as JD.com, Tencent, Xiao Mi, Meituan, Baidu, 360 are all lining up. They all want to take advantage of their user streams and get into financial services. Famous economist Song Qinghui believes that there exists, at varying levels, issues of disorderly development, unfair competition, privacy issues, and harm to consumer rights in these leading internet companies, which accumulate into quite sizable risks and hidden dangers.  

Song said that e-commerce giant JD.com watched as Ant Group tested the waters first and then followed in its footsteps. Caijing Tianxia added that JD.com-affiliated JD Digits, which has now been folded into JD Technology, changed its mind on going public after Ant’s IPO was halted.  

“Jack Ma crossed the river by feeling for stones. [JD founder] Liu Qiangdong crossed the river by feeling for Jack Ma.” JD Digits, which originally wanted to follow Ant’s model, has now also terminated its plan to go public on the Science and Technology Innovation Board.

Caijing Tianxia Weekly, April 13

More shoes

Despite the positive reaction of the market to the release of the rectification plan on April 12, official voices say that Ant Group is still not in the clear. 

Shoes continue to fall, if not for Ant then across its peer group. Most recently, China’s central bank and four other regulatory agencies told leading internet companies, including Tencent Holdings, Didi Chuxing, and JD.com, on April 29 that their platforms should stop provision of other financial services beyond payments. 

For Chinese media, one thing is certain. Regulators have used Ant Group to set a precedent for other tech giants wanting to adopt the company’s lucrative business model of linking various services normally provided by banking institutions with its core payment platform. 

The leading platforms have responded in turn. Almost 36 of China’s internet companies, including ByteDance, Baidu, Pinduoduo, and JD.com had pledged to comply with the country’s antritrust laws by April 14, two days after Ant Group met with regulators and four days after parent company Alibaba was fined a record-breaking RMB 18.2 billion ($2.8 billion).

Julia Lu

Julia is an intern at TechNode. After graduating from Harvard University, she worked in the entertainment industry with Chinese writers and directors. Since then, she has researched the international impact...