China tells banks, state firms to report exposure to Jack Ma's Ant Group

Multiple Chinese regulators told institutions to closely examine all exposure they had to Ant, its subsidiaries and even its shareholders up to January. PHOTO: REUTERS

BEIJING (BLOOMBERG) - The Chinese authorities have told the nation's biggest state-owned firms and banks to start a fresh round of checks on their financial exposure and other links to Ant Group, renewing scrutiny of billionaire Jack Ma's financial empire, according to people familiar with the matter.

Multiple regulators, including the banking watchdog, recently told institutions under their oversight to closely examine all exposure they had to Ant, its subsidiaries and even its shareholders up till January, said the people.

The sources described this as by far the most thorough and wide-ranging look into deals with Ant and said institutions were told that they must report findings back as soon as possible.

It was unclear what triggered the new scrutiny or whether it will lead to any actions or conclusions by regulators, the people said. The National Audit Office is leading the initiative, two of the people said. The China Banking and Insurance Regulatory Commission and the top auditor did not immediately respond to requests seeking comment. Ant declined to comment.

Chinese technology stocks dropped for the third straight session on Tuesday (Feb 22) amid fresh worries over Beijing’s regulatory plans for the sector. The Hang Seng Tech Index fell more than 3 per cent and headed for the lowest close since its inception in 2020. Alibaba Group Holding, which owns a third of Ant, led the declines, slumping 5.1 per cent to reach the lowest point since it was listed in the city in 2019.

Shares in Chinese food delivery giant Meituan also extended their losses on Tuesday, dipping almost 5 per cent. It had plummeted more than 20 per cent since Friday - the stock’s biggest fall in seven months - when China’s top economic planner ordered Internet platforms to lower fees for struggling restaurants.

More than a year after the Chinese government snuffed out the biggest initial public offering (IPO) in history by Ant, Beijing has shown no let-up in a crackdown that has snowballed into an assault on every corner of China's technosphere. Officials have handed out billions of dollars in antitrust fines to end the domination of a few heavyweights as President Xi Jinping pushes for more "common prosperity".

Ant was hit the hardest among them all. Beijing scuttled the fintech giant's US$35 billion IPO in November 2020, ordering it to overhaul businesses, including lending, insurance and wealth management, and set up a financial holding company so it could be regulated like a bank.

As part of the restructuring, Ant has ramped up its capital base to 35 billion yuan (S$7.4 billion) and moved to build firewalls in an ecosystem that once allowed it to direct traffic from Alipay, with a billion users, to services like wealth management, consumer lending and delivery. Consumer loans jointly made with banks were split from its "Jiebei" and "Huabei" brands. Assets under management at its money market fund Yu'ebao - once the world's largest - dropped by more than a third last year to 765 billion yuan by December.

The process was delayed last month, however, after state-owned bad-debt manager China Cinda Asset Management surprisingly backed out of a plan to take a major stake in Ant's consumer finance unit. The fintech firm has yet to apply for a financial holding company licence.

A least a dozen Chinese banks have been paring their years-long cooperation with Ant on consumer lending since the clampdown.

Meanwhile, the nation's top anti-graft group in January made rooting out corruption tied to "disorderly expansion of capital" one of its priorities. A month later, it arrested a former party chief of Hangzhou - the home city of Ant and Alibaba - on corruption charges, including using his influence to help his younger brother's businesses. One of those companies had received investment from a firm controlled by Mr Ma's Ant, according to a local media report in August. Neither Ant nor Mr Ma has been accused of wrongdoing related to the case.

The myriad restrictions mean Ant is worth a fraction of its former self as its growth prospects wane, according to some of its early Wall Street backers. Fidelity Investments slashed its valuation estimate for at least the second time last year to about US$78 billion as at June 30. Others are more optimistic: BlackRock values the company at US$174 billion and T. Rowe Price Group views it at US$189 billion.

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