Chinese authorities are reportedly set to impose a fine of at least 8 billion yuan ($1.1 billion) on Ant Group, signaling the end of the fintech company’s extensive regulatory restructuring. Sources cited by Reuters revealed that the People’s Bank of China (PBOC), spearheading the overhaul since Ant’s abandoned $37 billion IPO in 2020, is expected to announce the penalty in the coming days. This substantial fine, one of the largest ever for an internet company in China, will allow Ant Group to obtain a financial holding company license, pursue growth, and eventually revive its plans for a stock market debut.
China’s crackdown on private enterprises
The imposition of a fine on Ant Group would mark a significant milestone in China’s crackdown on private enterprises, which commenced with the cancellation of Ant’s IPO, resulting in substantial market value losses for several firms. At the time of its IPO suspension in mid-2020, Ant Group was valued at over $300 billion by certain investors. Since April 2021, the company has undergone extensive business restructuring, including transforming itself into a financial holding company, subjecting it to banking-like regulations and capital requirements.
While Ant and the PBOC have yet to respond, sources emphasised that the penalty is imminent. The sources also noted that central bank Deputy Governor Pan Gongsheng, recently appointed as the bank’s party secretary, has been actively involved in Ant’s regulatory revamp. Pan has participated in multiple meetings with the company regarding the fine and restructuring.
The National Financial Regulatory Administration (NFRA), a newly established governmental body under the State Council, now serves as the primary regulator responsible for granting Ant Group its financial holding company license, according to Reuters.
Largest penalty against a Chinese internet company
Reuters sources indicated that the final amount of the fine had been revised to a minimum of 8 billion yuan, surpassing the initially considered sum of approximately 5 billion yuan reported in April. This penalty would represent the largest regulatory fine ever levied against a Chinese internet company, exceeding the $1.2 billion fine imposed on ride-hailing giant Didi Global by China’s cybersecurity regulator last year. Ant Group’s affiliate, e-commerce titan Alibaba Group, also received a record-breaking fine of 18 billion yuan in 2021 for antitrust violations.
Aim to bolster private sector confidence
The potential fine for Ant Group comes as Chinese authorities aim to bolster confidence in the private sector, as the $17 trillion economy struggles to recover despite the earlier relaxation of COVID-19 restrictions. It also follows the return of billionaire Jack Ma to China earlier this year after an extended period overseas. Ma, the founder of Ant Group and Alibaba, withdrew from public view in late 2020 following a speech criticizing China’s regulatory system, which was widely seen as a trigger for the subsequent industry crackdown. In January, Ma announced his decision to relinquish control of Ant Group as part of the ongoing revamp, despite previously holding over 50 per cent of the company’s voting rights.
As the fine announcement draws near, the fintech industry eagerly awaits the outcome, which could have broader implications for the sector and private enterprises in China.
(With Inputs from Reuters)
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