Six years ago, the billionaire Chinese entrepreneur Jack Ma launched his technology services group Alibaba on the New York Stock Exchange in what was then the world’s largest stock market flotation. After losing that crown to Saudi Arabia’s Aramco, Mr Ma is poised to take it back when Ant Group, the financial technology business spun out of Alibaba and which he controls, lists in Shanghai and Hong Kong next week. It is expected to raise $34.4bn, surpassing the $29.4bn Saudi Aramco raised last December.
The record-busting initial public offering is a culmination of Mr Ma’s vision to disrupt China’s financial services industry. In just a few years, his company has changed the way billions of Chinese consumers and small businesses pay, borrow and invest. With an expected market capitalisation of $313bn, eclipsing that of many of the world’s established banking giants, Ant has become a technology-services titan boasting more than 700m monthly active users of its Alipay app.
The upcoming flotation is a powerful symbol of China’s growing confidence; its leaders will see Ant as proof that it need not be second best in any sector or rely on western business models and technology to prosper. The timing too, is opportune; China’s leadership, meeting this week to set a new five-year policy direction, can rightly point to an economy that is recovering faster than any other from the pandemic. Ant’s flotation is also further evidence that despite America’s pursuit of a technology trade war with China, Wall Street is still heading east. US capital continues to flow into China and investors are snapping up the Ant IPO, as well as other assets.
There are still significant obstacles in Ant’s path. Its increasing dominance — both nationally and internationally — creates policy issues for regulators. Beijing’s laxer regulatory environment may have allowed Ant to prosper, but the government has tightened its supervision. The company has had to impose caps on how much people can invest in money market funds to assuage concerns of liquidity risks and rising household debt. Beijing is also alert to the possibility of money laundering through Ant and other big tech conglomerates, including Tencent. Personal income tax evasion in China is extremely high and a driver behind the government’s move to create a digital renminbi is to catch evaders.
But by far the biggest issue is about the management of data. Ant and its rivals hold vast amounts of user information. This needs to be carefully managed and regulated. The Bank for International Settlements has previously warned about the potential of big tech companies to quickly become systemically relevant financial institutions. Regulators need to be alert to the consequences of these companies becoming major cross-border payment systems and should hold them subject to the same strict regulations that apply to banks.
Ant’s international business is still small relative to its Chinese operations, but its ambitious expansion plans have seen it take minority stakes in 10 e-wallet ventures in Asia. Ant may face the same questions as other Chinese tech groups over whether the data of foreigners is secure from the Communist party. This could limit its growth abroad.
For now, the rise of Ant is a Chinese success story. It deserves credit for its innovation and an offering that is as good as anything in the west. Tighter regulation remains the greatest barrier to further growth, both at home and abroad. Future success will depend, in some measure, on whether Ant can play by the rules.
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October 29, 2020 at 01:22AM
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The march of Ant is a Chinese success story - Financial Times
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