China: fintech giants, target of authorities

Audio 03:28

The founder of e-commerce giant Ali Baba, Jack Ma, saw his fortune increase by 49% during the coronavirus crisis.

AP Photo / Thibault Camus

By: Aabla Jounaïdi Follow

8 min

It was to be the largest IPO in history, estimated at $ 37 billion in the Hong Kong and Shanghai markets.

But Ant Group, the financial arm of Chinese Ali Baba, will wait.

Two days before this historic November 8, the Chinese authorities decided to restrict microfinance activities, the group's core business, putting an end to its stock market ambitions.

When, elsewhere in the world, it is Facebook and Amazon that are in the crosshairs, in China it is fintech.

Officially, to preserve the Chinese financial industry.

Publicity

Ant Group, the ant group, 33% owned by Ali Baba, the e-commerce giant.

Its introduction on the “ 

 ”, the Shanghai financial center dedicated to technological stocks, was to complete a journey of more than a decade of exponential development in the Chinese market.

A market that has made it an even bigger player than traditional banks since the company would have been valued at 318 billion dollars.

It all collapsed two days before the operation.

The international financial press saw the hand of the politician and even that of President Xi Jinping himself, according to the

last week.

The pressure would have risen suddenly after criticism formulated by the famous founder and former boss of Ali Baba Jack Ma, who during a financial summit in Shanghai would have blasted the health of the Chinese financial system and especially the role considered harmful of the regulator.

Scathing remarks that would not have rained in high places so but are these criticisms justified

Connoisseurs of Chinese decision-making argue that in the shadows,

.

In any case, the will to regulate its

giants

which have gained even more power in these times of pandemic is stronger than ever.

Paradoxically, this is part of the overall efforts to regulate the financial sector to attract foreign investors.

A first anti-trust law was passed at the beginning of the year, with rather vague outlines.

This time, it is a bill specifically regulating online micro-credits, which have become the main source of revenue for Ant Group.

The new rules would require fintech players to have 30% in capital of the amounts loaned, conditions they do not meet.

The bill also attacks the methods used to exploit massive user data.

These practices would contribute to inflate debt and pose a threat to the balance of the system, recognized Chinese officials.

Users, more and more sensitive to the use which is made of their data, are called upon until the end of the month to give their opinion on this bill online.

What consequences should we expect for Ant Group and others

Difficult to say

, everything depends on how the texts will be applied and how these groups will meet the expectations of the authorities.

The fintech giants like Ali Pay or the competitor WeChat Pay have become over the years key players in the financing of individuals and businesses.

Thanks to the leeway that has been left to them all these years, they have innovated and made the country the largest

market in the

world.

But today, everything seems to be done to eject them.

The blow to Ant Group has put the spotlight again on the sovereign digital currency project that the Chinese government has begun to experiment with.

It would be deployed by 2022 thanks to traditional banking players.

This would be a further step in the resumption of control of the financial sector by the supervisory authorities.

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