New China Laws Mean Ant Group Must Pay At Least $731M To Register As Financial Holding Company
New Chinese finance rules will force Ant Group to comply with regulations to back up any payments, lending or other finances with substantial capital, according to a report from The Wall Street Journal (WSJ).
According to new rules passed down from the Peoples’ Bank of China (PBOC), firms operating two or more financial businesses in China will be classified as financial holding companies as of Nov. 1, and will have to apply for a license to do so.
The point of the new regulations, according to PBOC, is to boost supervision of large companies and to help protect the economy from super-large-scale or connected businesses.
That means large state-owned or private conglomerate companies like Ant will be targeted by regulations under the idea that they could pose risks. Financial holding companies will be required to have registered and paid up capital totaling at least 5 billion yuan ($731 million), and also those which have financial assets or loans comprising 85 percent or more of their total assets.
Ant began looking to make an initial public offering (IPO) filing last month. Almost immediately thereafter, regulators began looking at how to rein in giant conglomerates, PYMNTS reported, hoping to contain “acquisition sprees.” The new rules didn’t come as a surprise to those operating in the Chinese finance realm, although any disruptions of Ant’s listing would come as a shock.
Hangzhou-based Ant runs payments company Alipay, which claims over 1 billion users in China and handled more than 118 trillion yuan ($17.3 trillion) in the year leading up to June 2020, according to WSJ. As of June 30, the company had 71.4 billion yuan ($10.4 billion) in cash assets. Digital payments generated a sizable amount of that funding, and technology-related fees from selling loans and financial products are also a growing amount of funding for the tech giant.
Also last month, the company was also looking to set up a new consumer finance program to consolidate its standing in the online lending industry.