Opinion: Ant IPO shows Chinese regulators still reign supreme
The postponed dual offering would have been the largest in history, its delay shows that the regulators are not afraid to take a stronger stance where necessary
In an unexpected move in early November, Alibaba affiliate Ant Group had to postpone its proposed IPO on the Shanghai and Hong Kong Stock Exchanges, just two days before the company was planning to announce its $34 billion dual listing. It would have been the largest IPO in history.
The Shanghai Stock Exchange told the company that its proposed offering no longer met its listing requirements. This came a day after the China Securities Regulatory Commission met with the company's executives, including Jack Ma, Ant Group's controlling shareholder and co-founder of Alibaba.
It transpired that Ma had made comments criticising financial regulation in China at the Bund Summit in Shanghai at the end of October, claiming that the regulatory system needed to change to fuel growth. The series of events shows that however big a Chinese company can become, it still falls under the control of the Chinese financial regulators.
However, it does seem that the regulators are playing catch up with rule changes, especially in the rapidly changing area of fintech.
Over the past few years, Ant Group has radically changed the world of mobile payments through its Alipay platform, and has rapidly added to its product offerings that range from consumer loans to wealth management and insurance.
An important part of the company's success is its focus on democratising asset management and lending. In a financial market dominated by traditional Chinese banks that lag when it comes to diversity in consumer wealth management products and can easily shrug off small businesses looking for loans, Ant Group has filled a significant gap in the market.
But until now, there has been little regulation or scrutiny of the ballooning success of fintech companies like Ant Group. In the same week that Ant Group pulled its IPO, the People's Bank of China and the China Banking and Insurance Regulatory Commission launched draft rules to tighten the microlending market. The rules indicate that the central regulators will be taking on supervisory roles in monitoring microlending companies, and will cap the size of microloans.
These rules were followed by another set of draft rules on November 10 that propose to clamp down on anti-competitive practices of internet companies in order to maintain market fairness.
While China's relatively loose financial regulatory framework might have prompted the innovative success of Ant Group, the Chinese regulators are evidently keen to show that they are not afraid to take a stronger stance to rein in companies that they believe pose a threat to financial stability.