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Analysis: Jack Ma's Ant Group was the next big thing. Now it may become just a boring bank

February 19, 2021. Summarized by summa-bot.

Compression ratio: 22.3%. 2 min read.

A pedestrian walks past an Alipay sign outside an Ant Group Co. office building in Shanghai, China, on Thursday, Dec. 24, 2020. China kicked off an investigation into alleged monopolistic practices at Alibaba Group Holding Ltd. and summoned affiliate Ant Group to a high-level meeting over financial regulations, escalating scrutiny over the twin pillars of billionaire Jack Ma???s internet empire. Photographer: Qilai Shen/Bloomberg

Jack Ma's Ant Group quickly became one of China's most powerful companies, and its plans for bridging the worlds of tech and finance were growing ever more ambitious by the day.

Hong Kong (CNN Business)Jack Ma's Ant Group quickly became one of China's most powerful companies, and its plans for bridging the worlds of tech and finance were growing ever more ambitious by the day.

Months after the company's blockbuster initial public offering was shelved at the last minute — a move that appears to have been sparked by Ma's criticism of Chinese regulators — several media outlets have reported that Ant has agreed with authorities to become a financial holding company.

Authorities are growing increasingly mindful of how much influence Ant and its peers have on the country's financial system — Ant, for example, now commands more than half of the mobile payments market in China — and are looking for ways to rein them in.

The People's Bank of China last September outlined new measures for financial holding companies that required them to hold "adequate capital" matching the amount of assets they have, among other measures.

Ant will have "less flexibility and innovative space," if it becomes a financial holding company, wrote Ji Shaofeng, the chairman of the China Small and Micro Credit Industry Research Association, in Caixin Global magazine last November after the IPO was pulled.

But while systems like Europe's are complex, he called China's financial system an "adolescent" that is better served by innovative tech firms that can bring banking to poor populations and small-time businesses that are otherwise locked out of traditional banks.

The tech entrepreneur's choice of words during that speech grew even more colorful — he criticized China's conventional, state-controlled banks for having a "pawn shop" mentality — and likely spurred Beijing to act swiftly in retaliation.

That means Beijing will likely remain careful "not to kill the goose that lays the golden eggs,"said Martin Chorzempa, a senior fellow at the Peterson Institute for International Economics, who researches financial tech innovation in China.

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