The Chinese government signs an agreement with Ant Group

  •   03/02/2021 - 10h45
  •   HARMANT Adeline

The Chinese government has just decided to restructure Ant Group, whose IPO it had previously cancelled and which it had asked to be restructured. However, according to the Wall Street Journal, this will soon be done because senior Chinese officials have reportedly asked this Alibaba subsidiary to become a holding company.

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The Chinese government signs an agreement with Ant Group
Image copyright: Daniel Cukier

Why this choice in the restructuring of Ant Group?

The choice of a holding company is largely due to the legal framework that surrounds this type of financial company, with stricter supervision of shareholding, financing management and the company in general. This framework also requires investments in financial subsidiaries.

This holding company should be supervised by the BPOC, which is the Chinese central bank. This will allow the government to monitor and control this company.

It was therefore after several months of problems that fintech finally submitted a restructuring plan to the authorities, the details of which are not yet known. According to the sources, this case should indeed be settled by mid-February. The Ant Group has set up a working group headed by its managing director and has appointed a compliance officer to lead the restructuring.

The change will therefore take place under the supervision of the Financial Stability and Development Committee. Five major changes have been requested by the authorities, including a return to payment originator activities, retention of personal data on lending activities, creation of the financial holding company, changes to governance and a review of asset management.

But it is above all the issue of data that is at the heart of this affair, since Ant Group has collected millions of data with the aim of granting financial loans. But the Chinese State could also take advantage of this holding company to disseminate its digital yuan as widely as possible when it is put into circulation.

 

Ant accused of having disregarded the laws and engaged in regulatory arbitrage:

The former head of the China division at the IMF, Eswar Prasad said in a statement: "Financial regulators were concerned about Ant's regulatory arbitrage practices, which would have allowed the financial regulators were concerned about Ant's regulatory arbitrage practices, which would have allowed the company to give a positive image of its financial situation and conceal the financial risks generated by its aggressive expansion into new business areas.»

In particular, the Alipay business, a payment service that has processed more than $17 trillion in transactions and granted more than $500 million in loans, has been criticized.e for positioning itself as an intermediary between the banks that grant loans and customers, which minimizes risks and therefore, according to the government, threatens the entire banking system.

For the time being, no major player in this affair has wished to comment.