Chinese state-owned firms reportedly required to unveil exposure to Ant Group

The Chinese government is working on a new round of checks on Jack Ma's Ant Group as state-owned companies and banks are required to examine financial exposure they had to the group, according to a report from Bloomberg.

The report said the Chinese authorities instructed various institutions to "closely examine all exposure they had to Ant, its subsidiaries and even its shareholders up to January". It was reported that the latest round of examination was the most thorough one to look into deals with Ant Group.

The examination was led by China's National Audit Office. However, the reason for undergoing the latest round of scrutiny was unclear.

Jack Ma's financial empire has been the target of the Chinese government since late 2020 as he enraged regulators by saying that traditional banks should move away from their "pawnshop operating model". He also questioned if international financial regulations were fit for the Chinese economy. This led to the abrupt suspension of Ant Group's IPO in November 2020.

Moreover, Alibaba Group was given the US$2.8 billion antitrust fine imposed by China's State Administration for Market Regulation in April 2021. The investigation, which began in December 2020, concluded that Alibaba's "choice of two" behaviour "eliminated and restricted competition" in China's eCommerce market and "hindered the free circulation of commodity services and resource elements", the State Administration for Market Regulation said. It added that this also "affected the innovation and development of the platform economy".

On the same day that Alibaba was hit with the fine, the company issued a statement saying that it "[accepts] the penalty with sincerity and will ensure [its] compliance with determination". It also expressed gratitude to the trust and patience that its merchants, consumers, partners and shareholders have given the company.

A few months later, the Chinese government planned to create a separate app for Alipay's loans business, and ordered Ant Group to separate its two lending units from its main business, according to a report from Financial Times. The report said Beijing hoped to break up the superapp Alipay owned by Jack Ma's Ant Group which has over one billion users. It ordered Ant Group to separate Huabei, similar to a traditional credit card, and Jiebei, which offers small unsecured loans, into a new entity and bring in outside shareholders.

Also, the Chinese government wanted these lending companies to have an independent app, while it also hoped to require Ant Group to turn over user data that underpins its lending decisions to a new and separate credit scoring joint-venture. The report cited a source that this joint-venture would be partly state-owned.

(Photo courtesy: 123rf)

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