China extends crackdown on Jack Ma’s company, forces Ant Group to restructure

After imposing a record antitrust fine on Jack Ma’s Alibaba Group Holding Ltd., China has now ordered its affiliate Ant Group, formerly known as Alipay, to overhaul operations and register as a financial holding company under the Central bank, a move seen as a wider crackdown on the tech billionaire. The announcement by the Chinese regulators was made late on Monday after China slapped a $2.8 billion fine on the online shopping giant. What this implies is, Alibaba (BABA)-the affiliated firm will now operate under guidelines similar to Chinese state-owned banks. In November, the Chinese fintech company was ready to shatter the records with a $37 billion IPO which was valued at an estimated $300 billion, but a week after Ma’s comments denouncing China's regulatory banking rules, Ant Group’s IPO was suspended, multiple reports confirmed. 

Tougher regulatory oversight

Now the Ant Group will face tougher regulatory oversight and capital requirements by the Chinese government that will make it harder for it to operate the financial technology company Alipay. However according to multiple reports, after China imposed the antitrust fine on Jack Ma’s company, its shares surged by 8 percent. Ant Group needs to face up to "serious problems" in its financial activities, vice governor of the People's Bank of China Pan Gongsheng said in a statement. He added that the company’s management executives were called to meet with financial regulators and Chinese authorities. 

Several media reports alleged that the new rules were on the table since September last year, and the company was required to adequate capital that must match the assets it holds. "Ant Group, in its entirety, will apply to set up a financial holding company to ensure our financial-related businesses are fully regulated," the company said in an official statement in Mandarin. Ma Xiangyun, chief banking analyst at Soochow Securities told CNN that the announcement was expected and that the Ant will likely face even stricter regulations on how much capital it must hold than the state-run Chinese banks. Ant also holds a 2.15 trillion yuan ($333 billion)  loan from last year. Chinese authorities want Ant to overhaul its credit, insurance, and wealth management services and want the firm should snap ties with affiliate Alipay and its consumer lending services Jiebei.