China To Break Up Ant Group’s Loan Business To Separate Joint Venture
Updated: Sep 14, 2021
Alipay's loan feature may soon get its app in the future, but not in the way Jack Ma's Ant Group wanted.
A Financial Times report stated that the Chinese government plans on combining a new credit scoring joint venture with Ant Group's successful loans business. According to two people familiar with the process, Ant Group will turn over the user data of its loans business to use as the joint venture's foundation. As such, Alipay will be unable to check its customer's creditworthiness independently.
Chinese regulators were upset with the company as it was involved with a tenth of China's non-mortgage consumer loans in 2020, citing the predatory nature of these loans and the financial risks involved. One person close to a financial regulator was quoted to have said that the Chinese government "wants to end" big tech companies' control of data - their main source of power.
Other state-controlled businesses were said to have a significant stake in the new joint-venture. Ant Group will only have 35% of the joint venture's shares while Zhejiang Tourism Investment Group Co, Hangzhou Finance, Invest Group and Zhejiang Electronic port will split the remaining 65% amongst themselves, with Zhejiang Tourism Investment Group Co. getting 35% of the total shares.
Reuters previously reported the joint venture is set to happen in July 2021, saying that it will loosen Ant Group's hold on the data of 1 billion users and will revive their initial public offering (IPO).
The joint venture also seems to be a part of the Chinese government's crackdown on China's big tech companies like Tencent and Alibaba, another company Jack Ma founded. You may remember the Chinese government previously targeted Ant Group with anti-monopoly investigations after its founder, Jack Ma, called for reforms in its financial and regulatory system on 24 October 2020.
Since then, Ant Group has been restructuring itself on the Chinese government's orders. In June 2021, the company set up a separate consumer-finance company that holds its two credit services, Huabei and Jiebei.
The Chinese government stated that Ant Group would not be the only online lender affected by the new rules. A person familiar with the situation said that the country's central bank told other online lenders that their lending decisions must be based on data from approved credit scoring companies only, not on the data they already collected.
Written by John Paul Joaquin