Xi Jinping downsizes the Ant Group (and Jack Ma)
China’s leading online microcredit company is forced to comply with the same rules as traditional banks. Like its majority shareholder Alibaba, it must obey the government’s directives. The authorities want the personal data of Ant's 730 million users. The Chinese Communist Party battles web giants.
Beijing (AsiaNews) – China's central bank, the People’s Bank of China (PBOC), is forcing the Ant Group to restructure itself under its supervision, PBOC Deputy Governor Pan Gongsheng said yesterday.
The Ant Group is a leading provider of online payment and microcredit services. Alipay, its web application, has more than 730 million users.
The “Ant Group attaches great importance to the seriousness of the rectification,” the company said in a statement, and it is ready to develop within the “national strategic context”.
In doing so, it can contribute to the “dual circulation“ strategy promoted by President Xi Jinping, which combines greater self-sufficiency (especially in the technological field), higher domestic consumption, and more foreign capital.
Ant has not resisted government directives, aimed at drastically containing the power of China’s web giants.
Alibaba, the champion of e-commerce founded by billionaire Jack Ma, the Ant Group’s majority shareholder, also fell into line recently after it was fined 18.2 billion yuan (US$ 2.7 billion) for abusing its dominant position.
Ant will become a financial holding company under the same regulatory regime as traditional lenders. So far, it has had a competitive advantage over the big banks, such as no obligation to maintain a minimum level of capital.
According to experts, to restructure, Ant will need at least 200 billion yuan (US$ 30.5 billion) in registered capital, a transformation that will most likely reduce its profits and value.
The central bank also wants Ant to share with the authorities its greatest asset, namely the personal data of its users.
The business founded by Jack Ma has long been in the crosshairs of Chinese authorities. In November, the government blocked Ant's stock market entry.
The listing, the highest in history (US$ 39.7 billion), was stopped because its activities were not in line with new government rules on micro-financing via web platforms.
China wants to adopt a clearer legal framework to put an end to monopolistic practices in the technological field, and it is not alone.
In December 2020, the European Union presented a draft law listing what digital companies can and cannot do, on pain of hefty fines or seeing their activities suspended within its territory.
In an open system such as that of the EU, web giants can negotiate; in China, they have to obey the Communist Party of China (CPC).
As Jiang Jinquan, director of the CPC’s Central Policy Research Office, noted in October, at the end of the Party’s 5th Plenum, the first objective of the 14th five-year plan (2021-2025) is to increase the concentration of power in the hands of the CPC (i.e. Secretary General Xi Jinping).
For Alibaba, Tencent and China's other big tech groups, the writing is on the wall: follow the party line or else.