Regulators with China’s central bank have ordered online financial services giant Ant Group to restructure its operations to meet regulatory guidelines.
The People’s Bank of China said in a statement Sunday that its regulators issued the requirements during a meeting with Ant Group executives the day before. Vice Governor Pan Gongsheng said the Bank outlined a list of problems with Ant Group, including a lack of sound governance, a defiance of regulatory demands, using its market dominance to squeeze out competitors and harming the rights and interests of consumers.
Pan said Bank regulators urged Ant to establish a separate holding company to ensure it has adequate operating capital, and to “strictly rectify illegal credit, insurance and wealth management financial activities.”
Ant began as a payments service for Alibaba, the world’s biggest online retail company, and evolved over time as one of the world’s biggest online financial services companies, offering such services such as loans, investing and insurance. The Bank called on Ant to return to its “payment origins,” enhance transparency around transactions and prohibit unfair competition.
Ant has issued a statement promising to establish a working group to ensure it is rectifying its issues with the Bank’s findings, and would fully comply with the Bank’s requirements.
The government surprised the financial world last month when it suspended the Ant Group’s debut as a publicly traded company on the Hong Kong and Shanghai exchanges, a move that cost the company $37 billion, which would have set the record profit for an initial public offering.
The Bank’s meeting with Ant coincides with the Chinese government’s market regulation agency decision to open an anti-monopoly investigation into Alibaba. The probe will look into the company’s practice of forcing its business partners to choose either Alibaba or a rival competitor, instead of allowing them to sell their merchandise through both outlets.
Alibaba was founded in 1999 by Jack Ma, who has become the richest businessman in China with an estimated net worth of $59 billion. The company is the world’s biggest online retail company and expanded into financial services and other fields.
The probe signifies Beijing’s increasing efforts to tighten control over the country’s dominant technology sector.
Analysts also say Chinese leaders may be targeting Ma because he complained about China’s regulatory system at a business conference in October, accusing it of stifling innovation and blocking opportunities.