The rumor is that Jack Ma was restricted from leaving Beijing to investigate the listing of Ant

The Chinese Communist government is investigating how quickly Jack Ma’s Ant Financial Services IPO was approved by officials, U.S. media reports said.

The Wall Street Journal on Tuesday (April 27) cited sources familiar with the matter as saying that the Chinese Communist government is investigating how quickly Ma’s Ant Financial listing was approved by officials.

The report said the central government began an investigation into Ant’s IPO approval process earlier this year, focusing on which regulators gave the green light for Ant’s initial public offering, which local officials lobbied for Ant to raise shares, and which large state-owned companies were waiting to profit from Ant’s IPO.

Ma restricted from leaving the country until investigation ends

The sources said Ma’s ties to relevant leaders are part of the review.

The investigation means the future of Anthem and controlling shareholder Jack Ma remains uncertain, the report said. Ma has kept a low profile since Anthem was called off at the last minute before its IPO in November.

Sources said Ma was restricted from leaving the country until Anthem completes a business overhaul ordered by regulators and the government investigation is over.

“In the eyes of China’s (Communist Party) top brass, Ant Financial’s business model, a lending model powered by big data, could jeopardize China’s financial system – in part because the company’s banking partners bear most of the risk.” The report said. “Executives also fear that among those waiting to benefit from the world’s largest IPO are: some individuals and institutional connections, China’s most influential political families and large state-owned funds.”

SEC and Shanghai officials also under investigation

The listing standards and procedures of both the SEC and Shanghai securities regulators are also reportedly under scrutiny by the Chinese Communist authorities.

The Science and Technology Board (STAR Market) of the Shanghai Stock Exchange is the listing point for Anthem’s current plan. Anthem successfully passed the listing process approval on the STAR Market in Shanghai, but was suddenly interviewed by four regulators prior to the listing and was subsequently called off the listing.

Created at the height of the U.S.-China trade war, the board was known to local officials and securities regulators in Shanghai for its importance to the Communist Party’s top leaders.

The idea was first introduced by Xi Jinping himself in late 2018. Among the few people who discussed the STB plan with Xi Jinping’s prior to the announcement was Li Qiang, the current secretary of the Shanghai Municipal Party Committee, according to officials with knowledge of the process.

Li Qiang is seen as a political star and trusted by Xi Jinping. Also as the former governor of Zhejiang province, home to Jack Ma’s business empire, Li Qiang has been supportive of Ma and Alibaba.

In 2018, the Shanghai government signed a strategic cooperation agreement with Ant Financial Services and Alibaba. In meetings with Ma, both Li Qiang and the mayor of Shanghai pledged full support for Ma’s business in Shanghai.

An investigation into Ant Financial’s approval will begin soon. It is unclear whether any individuals involved in approving or otherwise facilitating Ant Financial’s IPO will be held accountable, sources familiar with the investigation said.

So far, the investigation has led the China Securities Regulatory Commission to tighten listing requirements for the Shanghai Science and Technology Board to ensure that only companies whose primary business is technology can trade there.

Sources familiar with the matter also said the investigation also includes how a series of state funds, including large sovereign wealth fund China Investment Corp. and the largest state insurers – among them China Life Insurance Co. – secured an investment. For example, CIC is mandated to invest overseas rather than domestically.

Xi Jinping’s CCDI speech on the financial sector is the focus of this year’s anti-corruption effort

In a January speech to the Central Commission for Discipline Inspection, Xi singled out the financial sector as a key area of focus this year.

“The main responsibilities of financial management departments, regulators and local party committees and governments should be continuously compacted, the integration of financial anti-corruption and financial risk disposal should be done, and supervision and internal governance in the financial sector should be strengthened,” he said at the time.

Xi has been cautious about financial management since coming to power in late 2012, and the 2015 China stock market crash has made him wary of a financial coup.

This time, Ant Financial’s IPO approval process has heightened Xi’s concern that the country’s interests are not being adequately protected.

“The Ant Financial IPO shows that certain rules and regulations are still lacking in our development of financial markets,” an adviser to the Communist Party’s State Council told China Daily, “and that financial security must be ensured.”

The beginning of the investigation into Jack Ma’s group

Jack Ma is the founder of Alibaba, an e-commerce giant with a footprint spanning e-tailing, entertainment, media and the cloud, which has been under the care of Communist Party regulators, local officials and even the Red Two over the years.

Alibaba began a string of crackdowns after Jack Ma criticized the Communist Party’s financial regulatory system last October, and a planned listing of Alibaba’s one-third-owned fintech giant Ant Group in November was called off.

In December, Alibaba was placed on file by the Chinese Communist Party authorities to investigate its anti-monopoly practices. Four months later, Alibaba was fined an all-time high of 18.2 billion yuan by Communist Party regulators in early April. The penalty on Alibaba was reportedly set at the highest level of the CCP.

Ant Group executives have been interviewed several times by Communist Party regulators and asked to restructure the company’s operations; in March, CEO Hu Xiaoming resigned from his post for “personal reasons. In the latest news, Reuters cited sources familiar with the matter as saying that Beijing has asked Ant to clear the line with Ma and divest Ma’s shares and control.