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China’s regulatory revamp prompts overhaul of Jack Ma’s Ant Group
Ant Group’s headquarters in Hangzhou, Zhejiang province, China. Source: Aly Song/Reuters.
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  • China has ordered a sweeping restructuring of Ant Group, Jack Ma's fintech conglomerate, which had its record US$37 billion (roughly A$48.61 billion) IPO derailed by regulators in November
  • The overhaul will likely turn Ant Group into a financial holding firm, thereby curbing its profitability and valuation
  • Ant Group will also be subject to greater regulatory oversight and will be forced to cut ties with its payments app Alipay and several other businesses
  • The restructuring comes just two days after Ma's Alibaba Group was hit with a US$2.75 billion (roughly A$3.61 billion) anti-trust penalty
  • Ant said it will set up a personal credit reporting company to comply with relevant laws and strengthen the protection of personal information

China has ordered a sweeping restructuring of Ant Group, Jack Ma's fintech conglomerate, which had its record US$37 billion (roughly A$48.61 billion) IPO derailed by regulators in November.

The overhaul, which Beijing has been working on for several months, will likely turn Ant Group into a financial holding firm, thereby curbing its profitability and valuation.

It comes just two days after Ma's Alibaba Group, of which Ant is an affiliate, was hit with a US$2.75 billion (roughly A$3.61 billion) anti-trust penalty as China tightens its grip on the surging "platform economy."

Directed by China's central bank, the restructuring will subject Ant to tougher regulatory oversight and capital requirements. It will also force it to cut ties with its popular payments app Alipay and several other businesses, which have been viewed as a major advantage due to Alipay's vast stocks of customer data.

"This restructure effectively splits Ant into a few independent businesses to stop Alipay from being a super app capable of controlling the day to day lives of the Chinese people," said Oshadhi Kumarasiri, an analyst at Lightstream Research.

"We believe it will limit Ant's growth prospects and also open up the market for competition."

The People's Bank of China said that under a "comprehensive and feasible restructuring plan," Ant would cut the "improper" links between Alipay, virtual credit card business Jiebei and consumer loan unit Huabei.

It also suggested that Ant should break its "monopoly on information and strictly comply with the requirements of credit information business regulation."

In bowing to Beijing's demands, Ant said it will set up a personal credit reporting company, which will comply with relevant laws and strengthen the protection of personal information — an effort designed to prevent the abuse of data.

"The restructuring plan is stricter than expected," said Dong Ximiao, chief analyst at Zhongguancun Internet Finance Institute, adding that Ant would need at least 200 billion yuan [roughly A$40.12 billion] in registered capital to comply with the capital adequacy rule for financial holding companies.

"There's less uncertainty now as the restructuring plan finally lands, but we still need to wait and see how Ant implements all those requirements during the process."

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