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China’s Central Bank Says Ant IPO Could Resume Once Problems Resolved

2021-01-27 14:16:10

Ant Group Co. could resume plans for an IPO once issues are resolved, said the chief of China's central bank, providing relief to global investors looking for signs of what the future holds for the world's largest fintech giant.

Governor Yi Gang, Governor of the People's Bank of China, said relevant agencies are still investigating issues related to monopolies at billionaire Jack Ma's Ant Group, adding that matters are "complicated". ; and that some of the risks involved consumer privacy. To fix the problems, regulators need a clear legal framework, Yi said in a panel at the World Economic Forum on Tuesday.

"I would say this is a process and also once the problem is resolved it will go back to the road of continuing the consideration under the law," Yi said in English. When asked if that means an IPO, he added that if the company follows the legal structure, "you will have the result."

Chinese regulators are asking Ant to work on a timetable to overhaul his company after it abruptly shut down its $ 35 billion IPO in November. The fate of Ma & # 39; s sprawling fintech empire remains uncertain after China enacted a slew of design rules threatening to curb the growth of some of Ant & # 39; s most lucrative companies.

Yi Gang, Governor of the People & # 39; s Bank of China (Bloomberg)

Yi's message is the latest sign that Ant has avoided a worst-case scenario where it has to shut down businesses completely. Ma resurfaced in January, ending a period of months without public opinion that sparked intense speculation about his plight.

Ma addressed educators via a live stream at an annual event in January to praise rural educators and how he will spend more time on philanthropy. The co-founder of Alibaba Group Holding Ltd. and Ant during his speech did not mention his recent confrontations with Beijing.

Shares of Alibaba rose as much as 3.9% Wednesday morning in Hong Kong.

Last Friday, the Chinese bank regulator said recent measures that hit Ant hard did not target any specific company.

While regulators no longer directly called for a breakup of the company in December, the central bank stressed that Ant "must understand the need for overhaul" and come up with a timetable as soon as possible.

Monopoly Risks

PBOC Deputy Governor Pan Gongsheng said in an op-ed in the Financial Times on Wednesday that regulators are trying to strike a balance between encouraging fintech innovation and preventing financial risk.

"Network effects mean that fintech competition often leads to 'winner-takes-all' results, including market monopolies and unfair competition," he wrote.

Uncertainty remains for several of Ant's businesses, including consumer loans, crowdfunded healthcare, and payments. The central bank said last week that any non-bank payment company with half the market in online transactions or two entities with a combined two-thirds share could be subject to antitrust investigations under draft rules.

If a monopoly is confirmed, the central bank may propose that the cabinet impose restrictive measures, including splitting the entity by business type. Companies that already have payment licenses will be given a one-year grace period to comply with the new rules.

China's insurance and banking regulator last week said it would analyze the risks of crowdfunding healthcare activities by internet companies and take appropriate action. Ant said the same day that the chief architect of his healthcare company, known as Xianghubao, resigned.

Meanwhile, Ant & # 39; s consumer lending company could require more capital to comply with draft rules that impose stricter requirements on the units of credit.

Ant must inject at least 70 billion yuan ($ 11 billion) in new capital just for its lending, Bloomberg Intelligence analyst Francis Chan estimated in December. That calculation is based on draft rules that require Ant to co-finance 30% of the loans, with a maximum asset leverage of five times.

Main changes under design rules and impact on companies

Companies that provide online loans, such as Ant, should provide 30% of financing for loans. Consequence: Need more capital; Ant has about 2% of the loans on his books

Companies that are not allowed to operate outside of provincial bases without special permission from the bank watchdog. Permission, if granted, to be renewed every three years. Consequence: Require some companies to reapply for licenses; more frequent monitoring

Those who lend in multiple provinces have one 5 billion yuan of minimum registered capital. Consequence: More capital, more control over operations

A shareholder cannot control more than one nationally operating microfinance. Consequence: Limited extension vehicles

Top photo: Employees walk through the campus of Ant Group Co.'s headquarters. in Hangzhou, China. Photographer: Qilai Shen / Bloomberg

Copyright 2021 Bloomberg.

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