Ant Group has set up a working group to overcome last minute regulatory requirements which ceased the launch of its would-be record-setting initial public offering (IPO).
That’s according to Chen Yulu, a deputy governor of the People’s Bank of China (PBOC), who confirmed Ant’s expedited activity to rectify business practices.
Under the watchful eye of China’s central bank, Alipay’s operator is also in the swings of drawing up a timetable for the changes. First reported by the Financial Times, Yulu also confirmed this.
Ant’s rectification programme follows targets set by financial regulators. Yulu said Ant’s programme will “ensure the continuity of its business, the normalcy of its operations and the quality of its services,” as reported by South China Morning Post (SCMP).
Setting up a separate company
Regulators are in the process of notifying Ant as to which areas of its businesses need to be regulated as a financial institution. And which services need new operating licences to continue.
Identified financial services businesses will then move into a holding company, according to a SCMP source. Companies have until November 2021 to register new financial holdings, as per an announcement by China’s State Council.
Ant’s wholly owned subsidiary Zhejiang Finance Credit Network Technology could become the financial holding company.
Of the business arms to be sectioned off from Ant, a SCMP source says it’s likely the fintech’s credit services, whose revenue enjoyed an 87% jump in 2019, will be housed in Ant’s financial holding company.
JD.com, a Chinese e-commerce Big Tech, is currently re-organising its financial arm JD Digits into a new group. Called JD Technology, it will solely run the fintech, artificial intelligence and cloud businesses.
In 2020, Ant planned to raise more than $34 billion in what would have been the world’s largest IPO. Ant expected a valuation of $313 billion.
The Chinese government stepped in, halting things on the eve of the IPO. The Wall Street Journal went as far as to suggest China’s president, Xi Jinping, personally ordered the move.
New draft regulations submitted at the twelfth hour required Ant to provide at least 30% of the funding its loans rest on. Prior to its halted IPO, Ant funded just 2% of its loan balance sheet. The rest came from other sources, including banks.
Led by the PBOC, financial regulators later conducted a regulatory talk with executives from Ant Group in late December. It required the company to focus on its payment service. Specifically, working on the transparency of transactions, and on avoiding unfair competition.