China neuters Jack Ma’s Ant Group

• Jack Ma didn't endear himself with the Chinese authorities by his outspoken comments on regulation
• They then torpedoed the IPO of Alibaba's sister company, payments platform Ant Group 
• Now changes have been forced on the Ant Group that will see it become “just another bank”

The Chinese government is pegging back the giant Chinese conglomerate, Alibaba, co-founded by Jack Ma, after a probe found that it had been abusing its market position. It was fined it $2.8 billion as a warning shot across, not just Alibaba's bows  but also the  bows of the other Chinese giants  including Tencent and Baidu. Following the fine, Alibaba has gone from arrogance to contrition faster than a speeding bullet. According to the BBC the company says that it accepts the $2.8  billion fine and would now introduce measures to lower entry barriers and entry costs for businesses wanting to use its e-commerce platforms. 

Alibaba has also been forced to restructure its e-commerce subsidiary, the  Ant Group, following the regulators’ scuppering of the Ant IPO back in November.  Read: The regulators’ revenge: Why Jack Ma lost his Ant Group IPO.

Now Ant is to become a financial holding firm - a change calculated to illustrate that it has straight-jacketed its more freewheeling  business activities, considered by the authorities to be too risky and a threat to the stability of the Chinese financial system.

How it started...

Back in October Jack Ma, co-founder of the Alibaba Group and China’s richest man, gave what was described as the the most expensive speech in history - calling China’s state-owned banks "pawn shops" and advocating regulation exemption for Chinese technology companies. 

It went down badly with the Chinese Communist Party.

Very badly

Days later the Chinese regulators vetoed the IPO being planned for the Ant Group, China’s biggest electronic payments provider and a sister company of Alibaba. But commentators point out that the move wasn’t just retaliation for the Ma insubordination, but a response to legitimate concerns about  Ant Group’s finance arm and attendant monopoly issues. 

According to technology analyst Richard Windsor, founder of research company, Radio Free Mobile, Ant Group was seen as a major threat to the Chinese legacy banking system but the regulatory assault and the subsequent changes in approach have rendered it safe from the establishment point of view. 

Windsor says these changes include cutting off “improper connections” between its financial products and the Alibaba ‘Alipay’ business.

“Driving a wedge between these two activities will completely destroy [the beneficial links] and render the lending part of Ant Group to being just another bank,” he says.