China cracks down on Jack Ma's fintech conglomerate Ant Group

China’s financial technology conglomerate Ant Group Co announced a significant restructuring of its business on Monday, emphasizing Beijing’s decision to curb the country’s internet giants.

Ant Group will apply to become a financial holding company and will provide non-banking financial services overseen by China’s central bank.

In a statement on Monday, Ant Group said it understands the requirements that the financial regulators put forward for the ‘rectification’ of its main business in December last year.

Ant's restructuring statement was announced two days after the Chinese antitrust authority fined Alibaba Group 18.2 billion yuan (about $2.8 billion), on  Saturday, by far the largest antitrust penalty, for misusing its dominance in e-commerce.

Beijing’s strict actions have taken over the corporate empire of Jack Ma, the founder of Alibaba and controlling stakeholder of Ant Group, with Alibaba owning a third of Ant Group.

The revamp was revealed briefly after the People’s Bank of China, China Banking Regulatory Commission, China Securities Regulatory Commission, Foreign Exchange Bureau met with Ant representatives, according to a statement from the country’s central bank.

At the meeting, the regulators asked Ant to rectify aspects of its business like not taking advantage of unfair competition behavior, separate its credit business from its payment tools, the statement mentioned. The regulators reduced the fund size of Yu’e Bao, Ant’s easy-to-use saving service, amid the liquidity risk and ordered to ensure that the investment funds it offered to users would not have a liquidity crunch easily.

“This restructure effectively splits Ant into a few independent businesses to stop Alipay from being a super app capable of controlling the day-to-day lives of the Chinese people,” said Oshadhi Kumarasiri, a Lightstream Research analyst, who publishes on the Smartkarma platform. “We believe it will limit Ant’s growth prospects and also open up the market for competition.”

Chinese officials forced Ant to call off its initial public offering last November, a few days before its shares had been expected to debut, after Jack Ma, China’s richest man, publicly criticized the country’s financial regulators for its obsession to minimize risk and accused China’s banks of acting like “pawnshops” by providing loans to people who could put up collateral.

Picture credit: SCMP