By Julie Zhu and Jane Xu
HONG KONG (Reuters) – Chinese regulators are expected to fine Ant Group a quarter less than the more than $1 billion initially planned and lower the charges against it, the sources said, in an attempt to end the years of crackdown on major tech companies. .
The fine now being considered is about 5 billion yuan ($728 million), three people with knowledge of the matter said on condition of anonymity because details are not yet public.
Chinese authorities, particularly the People’s Bank of China (PBOC), which has been pushing for a revamp at Ant after its $37 billion initial public offering scuttled in 2020, are expected to announce the fine in the coming months. said two of the people.
The PBOC and Ant, founded by billionaire Jack Ma, did not immediately respond to a Reuters request for comment.
The fine would help pave the way for the fintech giant to secure a long-awaited financial holding company license, pursue growth and ultimately revive its plans for a market debut.
For the broader tech sector, a decision on Ant’s fine will mark a key step toward ending China’s harsh crackdown on private companies that began with the removal of Ant’s initial public offering and has wiped billions from the market value of Chinese companies.
A smaller fine following the recent return to China of Ant founder Ma, who has stayed abroad for more than a year since the IPO fiasco, offers support for Beijing’s softer tone towards the private sector.
That would also be in line with China’s efforts to bolster confidence among private entrepreneurs and stimulate growth in the $17 trillion economy hit by COVID-19, the sources said.
China’s economy grew just 3% in 2022, one of its worst results in decades, but it accelerated earlier this year.
A lower fine could also help reduce any negative impact on Ant and the fintech sector given the scale of Ant’s business and its importance to the industry, the people added.
However, the amount of the fine is still subject to change, they warned.
Regulators have been considering lowering the fine since at least January and have been in informal communication with Ant about it, one of the people said.
SMOOTER WRITING ON CHARGES
In addition to reducing the fine, authorities are also seeking to water down the wording of the charges against Ant, two of the people said, in a move likely to further assuage concerns from China’s private sector.
Authorities now plan to cite financial risks and operating certain businesses without proper licenses as triggers for the fine, the people added.
Previously, the fine was likely to focus on alleged violations related to the “disorderly expansion of capital” and the corresponding financial risks caused by their once-free deals, a source told Reuters in November.
Ant has been undergoing a sweeping business overhaul since April 2021, including becoming a financial holding company, subject to bank-like rules and capital requirements.
Just a day after Ma’s return to China in March, Alibaba said it planned to split into six units and explore fundraising or listings for most of them, a move investors saw as a sign that Beijing’s regulatory crackdown about companies was ending.
Ant, which runs the super app Alipay, has businesses spanning payment processing, consumer lending and the distribution of insurance products.
Ma, a former English teacher, previously held more than 50% of the voting rights in Ant, but in January the fintech giant said it would relinquish control of the company as part of the revamp.
($1 = 6.8719 Chinese yuan)
(Reporting by Julie Zhu and Jane Xu; Additional reporting by Kane Wu; Editing by Sumeet Chatterjee and Himani Sarkar)