Thu. Jan 20th, 2022

Jack Ma’s Ant Group suffered a setback for its government-led restructuring efforts after a state-owned asset manager unexpectedly withdrew from a deal to invest in fintech’s loan arm.

China Cinda Asset Management, controlled by the country’s Ministry of Finance, was set to invest Rmb6 billion ($ 946 million) in exchange for 20 percent of Ant’s loan business, but said late Thursday that he was withdrawing from the deal after “careful commercial consideration and negotiations with the Target Company”.

Ant, controlled by billionaire technology entrepreneur Ma, was to restructure his business since Chinese regulators pulled the plug on its $ 37 billion box office offering just days before it was due to appear in November 2020.

Mom has largely has disappeared from the public eye as Ant and its e-commerce group Alibaba came under severe government pressure. Financial authorities have focused on downsizing Ant’s business and limiting financial risk as part of a “correction” campaign for the fintech company, which was China’s largest consumer credit issuer.

The correction plan includes the closure of Ant’s largest self-management fund and force it to turn off two of its most valued businesses in new companies, which in turn accepted state shareholders.

Ant’s lending business, which was responsible for 39 percent of its revenue in the first half of 2020, is transferred to Chongqing Ant Consumer Finance, in which it holds a 50 percent stake. His large horde of user data will support a new credit rating company set up with state-owned shareholders, in which Ant holds a 35 percent stake.

Cinda’s planned investment was part of a capital raising for Chongqing Ant to strengthen its coffers and continue to lend to millions of users on Ant’s Alipay application.

Analysts at Fitch Ratings have predicted that the increased capital base will enable Ant to support much of its online lending activities within new government rules to curb financial risk.

Chongqing Ant said it “fully respects the business decision taken by Cinda and will work to bring in new investors to ensure that the corrective action on the consumer finance business is carried out effectively”.

Other minority shareholders in the company include Cinda’s subsidiary Nanyang Commercial Bank, battery maker Contemporary Amperex Technology, state-owned emergency debt investor China Huarong Asset Management and Jiangsu Yuyue Medical Equipment & Supply.

Jiangsu Yuyue said he also postpones his plan to invest more in Chongqing Ant.

Dong Ximiao, chief analyst at the Zhongguancun Internet Finance Institute, said it would not be easy for Ant to find an investor to replace Cinda.

“Not many companies have Rmb6 billion in cash on hand. . . and just having cash is not enough, the qualifications for investors to hold shares in these financial institutions are very high. ”

Chinese regulators have continued to investigate Ant and its superapp, Alipay. This week, Ant also scrapped an experimental investment tool he recently started offering to users.

The Chinese business news website Caixin said the function was forced offline due to regulatory violations. Ant said third-party fund advisers offered the tool “as part of a trial period that has [been] finish”.

Ant also continued to shrink silk flagship money market fund Tianhong Yu’e Bao to comply with the government’s rectification plan. The fund quickly became the world’s largest money market fund after its launch in 2013 by withdrawing remaining cash stored by users in Alipay’s payment application.

But at the end of the third quarter, Yu’e Bao’s assets under management fell to Rmb765 billion, or about half of its peak in 2018.

Additional post by Nian Liu in Beijing

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