Ant Group

Talks with regulators will make Ant Group healthier and live longer, Chinese analysts said on Thursday, after financial regulators announced that they are summoning Ant for a second round of talks, less than two months after the first discussions caused the company to suspend its historic dual IPO.

Effective regulation by watchdogs will be a favorable condition for the growth of Ant, an offshoot of e-commerce giant Alibaba, though in the short term there will be a considerable impact, analysts pointed out.

The country's central bank, the banking and insurance regulator, the securities regulator and the foreign exchange regulator will conduct regulatory talks with Ant Group within the next few days, according to a separate statement on the central bank's website on Thursday. 

The talks are expected to urge Ant to implement financial regulatory requirements, practice fair competition and protect consumers' legitimate rights, in accordance with market-oriented and law-based principles, thereby regulating the operation and development of financial businesses, the statement said.

Top market regulators in November released proposals for tighter regulations for the country's rapidly growing online personal loan sector, seeking to cap loans extended to a single individual at exceed 300,000 yuan ($44,850) and loans to an entity at 1 million yuan.

Fintech companies, including Ant Group, Baidu, Tencent and JD Digit, have moved to remove online deposit services from their platforms over the past week in line with new regulatory requirements for the internet deposit industry.

Analysts said with the regulators inclined to apply a universal set of rules to banks and internet finance companies, Ant's business scope will change significantly, but it will develop in a healthier way.

The traditional financing regulatory structure functions like The Titanic; it puts different business, such as deposits, insurance and wealth management in different waterproof chambers to prevent systemic risks.

Fintech platforms like Ant, however, operate like a conglomerate and offer a vast array of services to benefit from its vast user base, built up by its e-payment function. So there is a possibility that risks will spread from one business to another.

"The carefree adolescent years are over, and big companies are expected to act like grown-ups, and, due to their immense sizes and dominant market positions, the regulators actually expect them to be the most responsible grown-ups in the class," Li Junhui, a professor at the China University of Political Science and Law who follows e-commerce and the internet, told the Global Times on Thursday.

Based on the company's implementation of relevant regulations, Ant could face divestment or readjustment of its operations, and the ensuing IPO and its valuations will be affected accordingly, Li said.  

Amid the ruthless onslaught of the economy by the COVID-19 pandemic, there have been rising critical calls from the battered banking industries that Ant's business enjoys favorable conditions as it does not need to follow stringent compliance rules like banks.

Zhang Yi, CEO of Shenzhen-based iiMedia Research, told the Global Times that regulators intend to apply the same set of rules to the same business, such as deposit and loan operations, whether the operator is a bank in the traditional sense or an internet finance platform.

The news of the second talks prompted some to fear for Ant's suspended IPO, but Zhang said that for the moment, the focus should be on compliance now.

Whether Ant can still list its operations on the Chinese stock markets in the form of a smaller but more compliant business, or list its credit information operation, or fintech business as a separate offshoot is still unknown, and the question is moot now, Zhang said.

"For now, the question is whether Ant can be compliant with the regulations or what needs to be done for it to be compliant," Zhang said. "It could be said that Ant as we know it won't be the same after a round of compliance campaigns that could last well into 2022 or 2023."

At the just-concluded Central Economic Work Conference, it was stressed that strengthening anti-monopoly rules and preventing the disorderly expansion of capital will be among the top priorities for next year. Financial innovation should be carried forward in the context of prudential regulation.

However, analysts said what's happening to Ant could be actually help the company to develop in a healthier way and one that's more acceptable to the market.

"The communication with regulators will make Ant healthier, and this flexibility and possibility of communicating with regulators in such a manner is a benefit for Ant," Li said, noting that it will help make Ant's values more aligned with market expectations.

"The halt to Ant's IPO actually prevented its shares from suffering the fate of wild fluctuations and having an impact on the domestic stock market," Li said.

Analysts said Ant will also need to prove that its personal credit information operation, based on big data, is safe and secure.
Newspaper headline: Regulators summon Ant