On Friday, Chinese regulators announced that they have imposed a fine of nearly $1 billion on Ant Group, a major fintech company, for engaging in “illegal acts.” Additionally, they have also penalized a subsidiary of Tencent, a competitor of Ant Group, with a fine of $415 million. The regulators further mentioned that their ongoing efforts to regulate technology companies are nearing completion.
Ant operates Alipay, a digital payments platform that is the largest in the world. It has a huge number of users every month, both in China and in other countries.
The company was heavily targeted in a widespread crackdown on the tech industry in the country.
The China Securities Regulatory Commission (CSRC) stated that Ant Group and its affiliates have been fined 7.123 billion yuan (US$984 million) due to their past illegal and irregular actions.
According to the statement, the penalty involved confiscating the illegal income. The central bank of the country also shared this information.
According to the CSRC’s statement, they mentioned that currently, they have addressed and resolved the majority of the issues in the financial operations of platform companies.
According to the statement, the financial management department’s work focus has changed. They are now more focused on regular supervision rather than promoting centralized rectification of the financial business of platform companies.
Alibaba shares in Hong Kong saw a 3.44 percent increase on Friday following reports of an impending fine. Analysts believe that investors interpreted this penalty as an indication that the regulatory crackdown was nearing its end.
Ant stated that they will fully comply with the penalty’s terms and are committed to improving their compliance governance.
The company has finished the necessary tasks for rectification… Ant Group stated that it will continue to uphold its mission and original aspiration in the future.
“We are dedicated to pursuing innovation while upholding our commitment to integrity. We will also strive to improve our research and development capabilities to better serve and provide more value to the physical economy, particularly for consumers and small businesses,” the statement said.
According to the statement from the CSRC, the fine is related to various aspects such as corporate governance, financial consumer protection, involvement in banking and insurance business activities, payment and settlement business, compliance with anti-money laundering obligations, and the development of fund sales business.
The central bank announced that it has imposed a fine of almost 3 billion yuan ($415 million) on Tenpay, an online payment company owned by Tencent, which is a competitor of Ant.
According to the central bank, the penalty involved seizing over 550 million yuan in illegally obtained income.
On Friday, Tencent’s chairman Pony Ma submitted a document to the Hong Kong stock exchange. In the document, he mentioned that Tenpay had already taken steps to address certain issues, so the decision made on Friday would not significantly affect the overall operations and financial position of the company.
He said that the company believes that financial regulators will prioritize normalized regulation in the future. They will support and encourage platform companies to keep working towards financial inclusion.
Recently, Ant has been expanding its services to include loans, credit, investments, and insurance for a large number of consumers and small businesses.
The government is trying to control excessive personal debt and disorganized lending in the private sector. Many people saw Ant’s increasing influence as a threat to the established interests in the country’s government-controlled financial industry.
In 2020, the Alibaba affiliate had plans to launch a massive IPO worth $35 billion in Hong Kong and Shanghai. However, regulators suddenly canceled the double listing, stating that it did not meet the new capital requirements.
It is widely believed that a speech made by Jack Ma, the founder of Alibaba, in 2020, where he criticized Chinese regulators, was one of the factors that led to Beijing pulling Ant’s initial public offering (IPO).
In the following year, Beijing imposed a hefty $2.75 billion fine on Alibaba, accusing them of engaging in unfair practices.
According to a report from the Financial Times in 2021, regulators have instructed Alipay to separate its profitable micro-loan business and share customer data, which is utilized for lending decisions, with a new credit-scoring joint venture that has partial state ownership.
In June 2022, Chinese authorities denied reports that they had begun discussions about possibly reviving Ant’s IPO plans.
However, there was a positive development indicating that the strict measures were being relaxed. In December of last year, authorities announced that Ant had received approval to raise 10.5 billion yuan for its consumer finance division.
Ant Group announced in January that Jack Ma no longer had controlling rights in the company. Analysts speculated that this move might have played a role in helping Ant Group and Alibaba improve their regulatory situation.