China’s Ant Group Hit With Almost $1 Billion Fine
Key Takeaways
- China’s main regulators fine Ant Group $994 million for breaches
- Violations included issues with anti-money laundering and payments
- Alibaba’s stock surged 8% after the fine
China’s regulators cracked down on yet another company recently. This time, they’ve fined Ant Group, operator of Alipay and affiliate of e-commerce goliath Alibaba.
The company was issued a huge $994 million fine by the China Securities Regulatory Commission, the People’s Bank of China, and the National Financial Regulatory Administration.
It looks like the company really annoyed the regulators. Let’s find out why.
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What is the Ant Group?
Let’s start with a speedy summary of a Chinese rags-to-riches story.
After failing college, Jack Ma applied to work at KFC. He was the only one they rejected out of 24 interviewees, so he clearly ruffled some feathers. Pluckily, he dusted himself off and used the Colonel’s rejection as inspiration to start his own company. In 1999, he founded Alibaba with friends, all from his apartment in Hangzhou.
Alibaba struggled with typical start-up issues, including problems with investor funding and checkout payments. Ma created Alipay due to these payment issues, which now serves 1.3 billion people. The mobile payment provider only loses out to Visa for the top payment provider spot, so it’s pretty big business.
Now a billionaire and immensely successful entrepreneur, Ma founded the fintech company Ant Group in 2014. The group is fairly well-known for its mutual fund, Tianhong Yu’e Bao.
By 2019, over one-third of China had invested in the fund, with 558 million Alipay users chipping in. At the time, it was the world’s largest money market fund until further government regulation emerged, scuppering its success.
Why has China fined Ant Group?
The Chinese government hasn’t been a fan of Ant Group or Ma for a few years, and it’s generally been cracking down on the tech industry. The country has introduced stricter data protection and competition laws, hampering many large companies.
In 2020, Ant Group planned the biggest-ever initial public offering (IPO), looking to raise $34 billion. Unfortunately for Ant Group, China’s regulators halted the IPO. They had concerns about the size of the company blocking competitors and the lack of regulation potentially causing another global crash. To this day, Ant Group is still not publicly listed.
In 2021, Ant Group switched from focusing on being a tech company, instead converting to a financial institution under the guidance of the People’s Bank of China and its regulators. This opened the company to more regulation, stunting its growth and profits.
The bottom line
That leads us to now. Ant Group received a huge fine for apparent corporate governance and consumer protection breaches. Within this fine, regulators seized over $75m in “ill-gotten income.”
On the positive side, they signaled the end of their crackdown on the industry, stating a move to more “normalized supervision.” This news caused Alibaba’s (BABA) stock to surge by 8% as investors saw the light at the end of the regulatory tunnel. So it’s not all bad news for Ant Group.
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