Categories: Regulation

China Tightens Financial Regulations In Advance Of Ant IPO

Days after one of the world’s highest-valued FinTech conglomerates filed to go public, Chinese regulators are increasing scrutiny of non-bank financial companies.

Last week, Ant Group, an affiliate of the China-based Alibaba Group Holding and parent company of Alipay, which boasts more than one billion mobile payments platform users, applied for an initial public offering (IPO).

The Xinhua News Agency, the official media agency of the People's Republic of China, reported on Thursday (Sept. 3) that China’s State Council has approved new regulations for licensing procedures for financial holding companies that might include capital requirements, according to the Financial Times.

Under the new rules, non-financial companies that hold a majority stake in two or more financial firms must apply for a license to establish a holding company, the newspaper reported.

A draft version of related regulations published last year included a requirement that financial holding companies require capital “commensurate with the scale of their assets and risk level.”

An employee at one of the companies likely to be impacted by the new regulations told the FT that these proposals are meant to “put a lid on acquisition sprees.”

The director of a Chinese brokerage told the newspaper that regulation of financial holding companies in China would not surprise anyone and that the rules are imminent. While Ant had plenty of capital, the source said that “holding a little bit more capital is always a little bit annoying for these companies because they want to do more business with it.”

Still, an equities analyst said it would be very surprising for Chinese authorities to implement policies that could disrupt Ant’s listing. It’s likely the company has already received approval for the dual IPO listing, the source said.

For the first half of the year, the company reported 72.5 billion yuan ($10.5 billion), a 38 percent year-over-year increase. Net profit grew nearly 11 times to 21.9 billion yuan ($3.2 billion) over the same period.

Jack Ma, the Chinese billionaire and co-founder of Alibaba who owns one-third of Ant, is aiming for a valuation of more than $200 billion. If the IPO is approved to be listed on the Hong Kong and the Shanghai stock exchanges, it would put it only behind the Industrial and Commercial Bank of China (ICBC) and Ping An Insurance and on par with PayPal, Reuters reported.

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