FX.co ★ China orders Ant Group to “return to the roots”

Bloomberg reports that the Chinese regulator demanded that Jack Ma, the founder of Alibabа, returns his other company, Ant Group the fintech giant, to the national market. The demand to “return to the roots” as a payment service provider was reinforced with liquidation threats against the most profitable operations, such as consumer lending and wealth management.

Representatives of the People’s Bank of China (PBOC) discussed a revision of the current strategy with the management of Ant Group. According to the PBOC, the fintech giant is in need of “a business overhaul”. It is surmised that such a mandate threatens Jack Ma’s financial corporation that specializes in processing payment transactions similar to PayPal. It is believed that, without the government intervention, Ant Group could have held two IPOs simultaneously, assessed at over $300 billion. Now, however, Jack Ma’s brainchild will have to establish a separate financial holding to build up the capital and protect personal data of its clients.

The regulator criticized Ant Group for violating the rules of corporate governance, ignoring demands of the Chinese authorities and resorting to regulatory arbitrage. According to the PBOC, the fintech giant takes advantage of its leadership in the market to remove competitors.

Last week, between December 21st and December 27th, Beijing tightened control over Alibabа, with an investigation originated against it on suspected monopoly behavior. This caused a steep plunge in shares of the e-commerce giant being traded on the New York Stock Exchange.

Management of Ant Group is forced to accommodate the regulator’s requirements. The company will have to put together a special team tasked with pivotal changes in the business structure. At the same time, the fintech giant will have to maintain business operations of its clientele while controlling the risks.