JD.com Sells Off Cloud, AI Units To Its FinTech Arm

Chinese eCommerce giant JD.com said on Wednesday (March 31) that it had officially sold its JD Cloud and artificial intelligence (AI) business to its FinTech unit for a combined valuation of $2.4 billion, Reuters reported. The FinTech unit will issue ordinary shares to JD.com as part of the transaction. That means the parent company, JD.com, owns about 42 percent of the FinTech unit, which Reuters calls JD Digits.

In January, JD.com moved to fold its AI and cloud computing businesses into the FinTech unit. JD, one of China’s largest eCommerce platforms, competes with Alibaba Group and Pinduoduo. In March, JD.com moved to re-evaluate its plans for taking the FinTech unit public through an initial public offering of stock, putting the IPO application in limbo. The Shanghai Stock Exchange and the China Securities Regulatory Commission have not approved or denied the company’s application.

The Chinese government has been looking into the country’s eCommerce and FinTech giants, focusing on both monopolistic practices and financial issues. Ant Group’s IPO, which was planned for last year, was suspended.

In February, China’s State Administration for Market Regulation (SAMR) published new guidelines to strengthen anti-monopoly restrictions on Big Tech platforms. SAMR said the guidelines aim to prevent companies from price-fixing, manipulating the market via algorithms and restricting technologies. The agency also said the guidelines would “stop monopolistic behaviors in the platform economy and protect fair competition in the market,” Reuters reported at the time.

Also that month, Ant Group agreed on restructuring plans with Chinese regulators to turn itself into a financial holding company, which would place it under tighter capital requirements. Regulators’ concerns on the finance side are that Ant’s loan programs, for example, should be considered more like a bank than a FinTech. Mandates taking effect in 2022 would pose stricter capital requirements for such FinTechs. Consumer finance firms operating online would be required to operate more like mainstream financial institutions.