China May Soften Charges, Reduce Fine on Embattled Ant Group

A smaller fine will follow its founder Jack Ma’s recent return to China after staying overseas for more than a year after a dramatic regulatory crackdown

Chinese regulators are likely to reduce a fine imposed against Ant Group, formerly owned by embattled billionaire Jack Ma, and downgrade charges against the tech giant, sources have said.

Regulators are now considering a fine of about 5 billion yuan ($728 million) — about a quarter less than the more than $1 billion initially planned — three people with knowledge of the matter said.

The moves come as Beijing looks to end a years-long clampdown on marquee technology firms, and bolster confidence within the crackdown-hit private sector as part of efforts to spur growth.

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Chinese authorities, notably the People’s Bank of China (PBOC), are expected to announce the fine in the coming months after driving a revamp at Ant, which saw its $37 billion IPO scuttled in late 2020.

The PBOC and Ant did not immediately respond to request for comment.

The fine would help pave the way for the fintech giant to secure a long-awaited financial holding company licence, seek growth, and eventually revive its plans for a market debut.

For the broader technology sector, an Ant fine decision will mark a key step towards the end of China’s bruising crackdown on private enterprises that started with the scrapping of Ant’s IPO and has wiped billions off market values of Chinese companies.

Significant move

A smaller fine will follow founder Ma’s recent return to China after staying overseas for more than a year since the IPO fiasco.

It will offer support for Beijing’s softening tone toward the private sector at a time when the world’s second-largest economy, battered by Covid-19, looks to reopen.

China’s $17-trillion economy grew just 3% in 2022, one of its worst showings in decades, but gathered pace in the first quarter of this year.

A lower fine could also help reduce any negative impact on Ant and the fintech sector given the scale of Ant’s business and its significance to the industry, sources said.

The amount of the fine is, however, still subject to changes, they cautioned.

Softer charges

Regulators have been considering reducing the fine since at least January and have been in informal communication with Ant about it, one of the people with knowledge of the matter said.

Apart from lowering the fine, authorities are also looking to soften the wording of their charges against Ant, two of the people said, in a move that is likely to further quell concerns of China’s private sector.

Authorities now plan to cite financial risks and operating certain business without proper licences as the triggers for the fine, the people added.

Earlier, the fine was likely to be focused on alleged violations related to “disorderly expansion of capital” and the corresponding financial risks its once freewheeling businesses caused.

Sweeping revamp

Ant has been undergoing a sweeping business overhaul since April 2021, which includes turning itself into a financial holding firm, subject to rules and capital requirements similar to those for banks.

Just a day after Ma’s return to China in March, Alibaba said it was planning to split into six units and explore fundraisings or listings for most of them, a move seen by investors as a signal Beijing’s regulatory crackdown on corporates was ending.

Ant, which operates super-app Alipay, has businesses spanning payment processing, consumer lending and insurance products distribution.

Ma, a former English teacher, previously owned more than 50% of voting rights at Ant, but in January the fintech giant said he would give up control of the company as part of the revamp.

• Reuters, with additional editing by Vishakha Saxena

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Vishakha Saxena

Vishakha Saxena is the Multimedia and Social Media Editor at Asia Financial. She has been working as a digital journalist since 2013, and is an experienced writer and multimedia producer. As an eager stock market trader and investor, she is keenly interested in economy, emerging markets and the intersections of finance and society. You can tweet to her @saxenavishakha