China’s state broadcaster has implicated Jack Ma’s Ant Group in a corruption scandal that has increased pressure on the billionaire following a crackdown that swept billions of dollars from its internet empire.
A documentary on state-run China Central Television alleges that private companies made “unreasonably high payments” to the brother of the former Communist Party leader from Hangzhou, an eastern city that is the headquarters of Ant Group, in exchange for government policy incentives and support with the purchase of real estate.
According to public records and two sources close to the transactions, an Ant Group unit bought two pieces of land at a discount in Hangzhou in 2019 after taking over interests in two mobile payment businesses owned by the party secretary’s younger brother who documentary. .
While the documentary did not mention Jack Ma’s company, the Ant Unit was the only external corporate investor in one of these businesses, according to public records, and was among three corporate investors in the second.
“The nature of such a transfer of interests is an exchange of power and capital,” says the documentary, produced by the Communist Party’s Central Commission for Discipline Inspection. Materials broadcast by China’s state broadcaster represent the official party line.
The program intensified the pressure on Ant, as the fintech group with more than 1 billion users struggling to renovate its business to meet government requirements. Chinese regulators pulled the plug on an initial $ 37 billion public offering the company planned for 2020, forcing it to restructure.
Ant suffered a setback last week for its government-led reform efforts following a state-run asset manager drawn from an agreement to invest in the fintech’s lending arm without explanation.
The documentary claimed that Zhou Jiangyong, the former Hangzhou party secretary who was arrested in August for corruption, unidentified companies helped acquire cheap land and enjoy preferential policies after buying shares in companies controlled by the senior official’s younger brother, Zhou Jianyong.
The younger Zhou, a former business school professor, launched Youcheng United (Ningbo) Information Technology Development Co. in 2016 and won contracts to build mobile subway payment systems in the coastal hubs of Ningbo and Wenzhou, according to the documentary. His brother was at that time the party secretary of these cities.
“He won the business because I was a civil servant,” Zhou, the former party secretary, said of his brother in the documentary.
Ant entered into a series of agreements with the younger Zhou. Public records show Shanghai Yunxin Venture Capital Management Co., a subsidiary of Ant, paid Rmb1.7 million ($ 268,000) in March 2019 for a 14.3 percent stake and a board seat in Youcheng United (Ningbo).
Later in the year, Shanghai Yunxin spent Rmb1.4 million ($ 221,000) buying a 13.5 percent stake in a Hangzhou-based subway payment provider owned by junior Zhou and featured in the documentary, public shows records. The Hangzhou company also includes a state-owned enterprise as an investor.
Less than a year after Ant completed the second investment, the fintech group won an auction for a plot of land in Hangzhou for Rmb5,194 ($ 819) per square meter, as the only qualified bidder shows land auction records. Average house prices in the neighborhood exceed Rmb45 000 ($ 7 100) per square meter, according to real estate websites.
In the documentary, the former party secretary’s brother claimed he was asking a high price for investments in his companies.
“Of course you know I’m Zhou Jiangyong’s brother,” Zhou Jianyong said in the documentary. “You can imagine the price I increased. You want to take advantage of me. Shouldn’t I do the same to you? ”
Ant Group did not respond to a request for comment. The Financial Times could not reach the Zhou brothers for comment.
“The rise and fall of Ant shows the unequal relationship between business and politics in China,” said Nie Huihua, a professor at Renmin University in Beijing.
Ma kept a low profile while Ant and his e-commerce group Alibaba fought the growing political pressure, while China’s President Xi Jinping a “common prosperity”Campaign to revamp the country’s business and political landscape.
“The rise of Ant has a lot to do with his ability to get favor from local officials,” said a person close to the fintech group. “It can now pay a price for it.”