Ant Group Submits Blueprint for Conversion into Financial Holding Company to Chinese Authorities

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Jack Ma’s beleaguered Ant Group plans to deal the concerns of Chinese regulators about its business operations by converting itself into a financial holding company, according to sources who spoke to the Wall Street Journal.

Sources said that Ant Group has already submitted an outline of its restructuring plan to authorities, and that the plan is likely to be finalised before the Chinese New Year holiday in mid-February.

The establishment of a financial holding company was one of the requirements made of Ant Group by Chinese officials during disciplinary “regulatory discussions” held with company executives on 26 December, less than two months after the cancellation of a mammoth IPO that was expected to raise over USD$34 billion.

Chinese authorities have long been pushing for the use of financial holding companies as a more convenient and effective means for them to regulate financial operations – in particular those of large, unwieldy Internet platforms.

Just a day after summoning Ant Group executives for regulatory discussions, the Chinese central bank published an article on its official website calling for greater use of financial holding companies as a tool for regulating the “complex financial operations of Internet companies.”

“For China, including qualified internet companies within the purview of financial holding regulation embodies the concepts of health and high-quality development, and will help to create a standardised and excellent market order,” wrote Zhang Modong (张末冬) in the article entitled “Lawful Implementation of the Regulation of Financial Holding Companies, Driving Online Companies to Advance Steadily and Travel Far” (依法实施金控公司监管 推动互联网企业行稳致远).

Jack Ma’s e-commerce and fintech empire has come under heavy pressure from Chinese authorities ever since the cancellation of Ant Group’s November IPO, with observers pointing to concern over Ma’s outspokenness in relation to regulatory actions as well as the highly leveraged character of Ant Group’s lending operations. 

At the start of November 2020 Chinese regulators scuppered Ant Group’s proposed dual listing on the Shanghai and Hong Kong bourses at the last minute. The IPO, which was originally scheduled for 5 November, was expected to raise a record-breaking USD$34.4 billion.

On 24 December the State Administration for Market Regulation (SAMR) announced via its official website the launch of an investigation into monopolistic conduct by Jack Ma’s e-commerce platform Alibaba, while PBOC also summoned Ant Group for a round of disciplinary “regulatory discussions.”

Pan Gongsheng (潘功胜), PBOC deputy governor and director of the State Administration of Foreign Exchange (SAFE), said at a subsequent press conference that Chinese regulators demanded that Ant Group “return to its payment origins,” and that in the past the company had “regarded regulatory compliance demands with disdain.”

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