China may disclose Ant fine soon

Chinese authorities are anticipated to announce a substantial fine of at least 8 billion yuan ($1.1 billion) on Ant Group, likely to be revealed as early as Friday, according to sources with direct knowledge of the matter. The People’s Bank of China (PBOC), leading the regulatory overhaul of Ant Group since its halted $37 billion IPO in 2020, is expected to disclose the penalty in the coming days.

The fine, one of the largest ever imposed on an internet company in China, will serve as a crucial step for Ant Group to obtain a financial holding company license. This development will allow the fintech firm to pursue growth opportunities and eventually revive its plans for a stock market debut.

Beyond Ant Group, this fine holds significance for the broader technology sector, as it marks a milestone in China’s rigorous crackdown on private enterprises. The crackdown commenced with the cancellation of Ant Group’s IPO and subsequently led to a significant decline in the market value of several companies.

Both Ant Group and the PBOC have not responded to Reuters’ request for comment, and the sources chose to remain anonymous as they were not authorised to speak to the media.

Ant Group, founded by billionaire Jack Ma, is involved in payment processing, consumer lending, insurance product distribution, and other businesses. Prior to the IPO suspension in mid-2020, it was valued by some investors at over $300 billion.

Since April 2021, Ant Group has been undergoing a comprehensive business restructuring, including its transformation into a financial holding company, subjecting it to regulations and capital requirements similar to those governing banks.

The announcement of the fine on Ant Group comes shortly after the appointment of Pan Gongsheng, the deputy governor of the central bank, as the party secretary. Sources indicate that this move is a precursor to his appointment as governor. Pan has been actively involved in overseeing Ant Group’s restructuring and has participated in multiple meetings with the company regarding the fine and the overall revamp.

The National Financial Regulatory Administration (NFRA), a newly established government body under the State Council, now holds primary regulatory authority to grant Ant Group the required license, according to the sources.

The fine imposed on Ant Group is revised to at least 8 billion yuan, following earlier reports in April that Chinese regulators were considering a penalty of approximately 5 billion yuan, a lower amount than initially contemplated.

Ant Group’s fine will be the largest regulatory penalty imposed on a Chinese internet company since Didi Global, a major ride-hailing firm, was fined $1.2 billion by China’s cybersecurity regulator last year. Alibaba Group, the e-commerce giant affiliated with Ant Group, received a record fine of 18 billion yuan in 2021 for antitrust violations.

The imposition of the fine on Ant Group comes at a time when Chinese authorities aim to bolster confidence in the private sector as the economy, valued at $17 trillion, faces challenges in its recovery despite the easing of zero-Covid restrictions earlier this year.

Additionally, the fine coincides with the return of Jack Ma to China after spending several months overseas. Ma, the founder of Ant Group and Alibaba, had withdrawn from public view in late 2020 following a speech in which he criticised China’s regulatory system. The speech is widely regarded as a trigger for the subsequent crackdown on the industry. In January, Ma announced his decision to relinquish control of Ant Group as part of the ongoing revamp.