Chinese authorities are expected to conclude their probe of Ant Group Co. as early as Friday, resulting in a fine of over $1.1 billion. Alibaba Group Holding Ltd. shares surged in Hong Kong in response to this news. US Treasury Secretary Janet Yellen also engaged in informal talks with Chinese officials, aiming to stabilize strained relations between the two superpowers. Investors are also monitoring potential stimulus decisions by the Chinese government following Premier Li Qiang’s commitment to implementing targeted policies for economic recovery.
Chinese authorities are expected to announce a fine of at least 8 billion yuan ($1.1 billion) on Ant Group, putting an end to the fintech company’s extensive regulatory overhaul. Sources with direct knowledge of the matter revealed that the People’s Bank of China (PBOC), which has been leading Ant’s restructuring since its halted $37 billion IPO in 2020, will disclose the penalty in the coming days. Following the Reuters report, shares of Ant’s affiliate, Alibaba Group, surged as much as 6.4% in Hong Kong before retracing some gains.
The substantial fine, one of the largest ever for an internet company in China, will enable Ant to secure a financial holding company license and pursue growth, eventually reviving its plans for an initial public offering. The anticipated fine holds broader implications for the technology sector, marking a significant step towards the conclusion of China’s crackdown on private enterprises, which began with the cancellation of Ant’s IPO and led to substantial market value losses for numerous companies.
Ant, founded by billionaire Jack Ma, offers payment processing, consumer lending, insurance product distribution, and other services. Since mid-2020, it has undergone a comprehensive restructuring process, transforming into a financial holding company subject to banking regulations and capital requirements. The fine is expected to focus on alleged violations related to the “disorderly expansion of capital” and associated financial risks caused by Ant’s previously unrestricted operations.
The timing of the fine announcement coincides with the appointment of Pan Gongsheng, the deputy governor of the central bank, as the bank’s party secretary, a move seen as a precursor to appointing him governor. Pan has been actively involved in overseeing Ant’s restructuring and has participated in meetings with the company regarding the fine and the overall revamp. The National Financial Regulatory Administration, a newly formed government body, is now the primary regulator responsible for granting Ant the necessary license.