China fines Ant Group 7.1 billion yuan (US$984 million)

It's been a rollercoaster ride for China's largest fintech company, Ant Group, and its founder, Jack Ma.

China fines Ant Group 7.1 billion yuan (US$984 million)
Ant Group sign is seen at the World Artificial Intelligence Conference (WAIC) in Shanghai, China July 6, 2023. REUTERS/Aly Song/File Photo

The backstory: It's been a rollercoaster ride for China's largest fintech company, Ant Group, and its founder, Jack Ma. In November 2020, the company was gearing up for an IPO worth US$37 billion. But just two days before the much-anticipated launch, everything came to a halt. Regulators in China launched a widespread crackdown on various sectors, including big tech. They were concerned about some of Ant Group’s anti-competitive practices. As a result, the company was instructed to restructure its business and adhere to the same rules as traditional banks. Shortly after, its parent company Alibaba was hit with a record US$2.8 billion penalty after an anti-monopoly investigation.

More recently: In January, Guo Shuqing, the head honcho at the People's Bank of China, said in an interview with the state-run Xinhua news agency that the government's crackdown on fintech was “basically” a done deal. Its next aim, according to Guo, is to boost the economy, create more jobs and establish China as a fierce global competitor.

Around the same time, Ant Group made headlines by announcing its intention to comply with the new regulations. Founder Jack Ma decided to step back and hand over control of the company. His voting rights were slashed from over 50% to 6.2%. In March, Alibaba also split into six different units, each with its own leaders, as a part of a major restructuring.

The development: ​​China's central bank has taken action to wrap up the investigations, imposing big fines on several fintech companies, including Ant Group and Tencent. This move represents a finale of the regulatory crackdown, signaling a shift towards "normalized management" of the industry.

On Friday, the People's Bank of China (PBOC) announced that Ant Group, which operates the popular Alipay mobile-payment service, has been hit with a penalty of 7.123 billion yuan (US$984 million). The violations cited by the PBOC include breaches of consumer protection and corporate governance rules. According to a joint statement from the China Securities Regulatory Commission, the People's Bank of China and the National Financial Regulatory Administration, Ant Group broke the rules on banking and insurance activities, payments, anti-money laundering and funds sales.

On top of that, Alipay also got fined 3.06 billion yuan (US$423.7 million), while Tencent's Tenpay had to pay 2.99 billion yuan (US$414 million), as per the central bank's website.

Key comments:

“We will comply with the terms of the penalty in all earnestness and sincerity and continue to further enhance our compliance governance,” said Ant Group in a statement.

“The decision addresses market concerns about fintech and the overall Internet sector,” said Jefferies analysts, including Thomas Chong, in a note. They said it “removes overhang” on Alibaba’s shares.

"Next, we'll promote healthy development of internet platforms," said Guo Shuqing, the Communist Party boss at the People's Bank of China, in January. "We'll encourage them to come out strong in leading economic growth, creating more jobs and competing globally."