China’s Regulators Summon Jack Ma Over $37B Ant IPO

Jack Ma, founder of China’s fintech giant Ant Group, and two other executives were summoned on Monday by China’s top financial regulators for talks, ahead of the company’s $37 billion public offering.

In a brief statement, the People’s Bank of China (PBOC), the China Banking and Insurance Regulatory Commission, China Securities Regulatory Commission and the State Administration of Foreign Exchange said they had “conducted regulatory talks with Ant Group’s actual controller Jack Ma, chairman Eric Jing, and chief executive Simon Hu.”

The regulators provided no further details about the talks.

The talk came after Ma gave a speech last month in Shanghai, pointing out the lack of a healthy financial system in China and urging the reform of financial regulations

“China is not facing a financial systemic risk, but a risk that still lacks a healthy financial system,” Ma said. “Today, banks are still operating with a pawnshop mentality, needing collateral and guarantees are just like pawn shops . . . China’s financial pawnshop mentality is the most serious,” he added.

Ma also said there are too many controls in financial regulations. “Today, there are too many documents that don’t allow you to do something but too few supportive policies coming out. I am most afraid that after such supervision, risks disappear and relative department risks disappear, but the entire economy is at risk of not developing.”

Ma’s speech triggered heated controversy just as Ant priced its IPO.

Financial News, managed by PBOC, published an article on financial innovations and regulations after Ma’s speech.

“Someone criticized bank loans as pawnshop mentality, but big tech companies engaged in financial services use collateral in their actual lending just like bank loans,” it said.

“Big tech companies, as new entrants to the financial services industry, inevitably want to do financial services without being regulated. This new entrant will not only have an impact on the market landscape, but will also have a significant impact on the regulatory landscape, and will need to focus on preventing its evasion of regulation and regulatory arbitrage behavior.”

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The article wrote that “China’s financial system has certain problems. The Central Committee of the Party and the State Council have seen these problems and have focused on fixing shadow banking, strengthening corporate governance of small and medium-sized banks, and enhancing financial supervision in recent years. Similarly, just because there are some problems with financial regulation, big tech companies can’t demand superior treatment and be allowed to expand unchecked without regulation.”

In response to the talks, Ant Group said on the same day that they will “implement the meeting opinions in depth, and continue to follow the guidelines of ‘stable innovation, embracing supervision, service to the real economy, and openness for mutual benefit’, in order to continue to improve our inclusive service capabilities, and assist the development of the economy and people’s livelihood.”

Ant Group’s shares will start trading simultaneously in Shanghai and Hong Kong on Thursday for a $37 billion stock sale after allotment, which has broken all records as the largest fundraising in global finance.